Naspers spinoff Prosus listed on the JSE on Wednesday and opened at R1 238 a share. At 9:34 am it traded at R1 214 a share. At 10:56, Naspers traded at R2 416.57 – 31.40% lower than Tuesday’s close.
The listing of Prosus is a significant event for the JSE and Naspers, as it will see the unbundling of the group’s international internet businesses, including its 31% stake in Tencent. Naspers will retain a stake of around 73% in Prosus.
Shares in Prosus, a spin-off from Naspers that includes the e-commerce group’s 31% stake in Chinese tech giant Tencent, surged more than 25% on their stock market debut in Amsterdam on Wednesday, creating one of Europe’s largest internet companies.
Prosus comprises South African group Naspers’ global empire of consumer internet assets, including the stake in Tencent, the world’s biggest video game company and home to China’s hugely popular WeChat social media platform.
“We’ve become so big that further growth of our company on the JSE (Johannesburg Stock Exchange) would be difficult,” Naspers CEO Bob van Dijk told reporters after the listing, which values Prosus at more than $100 billion.
“The idea with today’s listing is emphatically that we find a new generation of investors here, on the Euronext, for our further growth,” he added, referring to the Amsterdam exchange.
Euronext had given an indicative price of 58.70 euros per share for Prosus, derived from Naspers’ value in Johannesburg.
Prosus shares jumped to 76 euros on opening and traded at 74.52 euros at 1125 GMT, a 27% increase, on volume of 4 million shares. With around 1.6 billion shares registered, that implies a market capitalisation for Prosus of around 119 billion euros ($131 billion), close to the market value of its Tencent stake.
Shares in Naspers, which is retaining a controlling 75% stake in Prosus, fell a corresponding 31% in Johannesburg, acting similar to a share that has gone ex-dividend.
The spin-off marks the end of an era for Naspers as it looks to move beyond the legacy of former CEO Koos Bekker’s prescient investment of just $34 million in Tencent when it was a startup in 2001, one of the most lucrative bets in corporate history.
The stake in Tencent is now worth $130 billion and has buttressed Naspers’ rapid growth towards becoming Africa’s most valuable listed company.
Prosus becomes the third-largest stock on the Amsterdam exchange after Shell and Unilever, and Europe’s No.2 tech firm after Germany’s SAP.
European players are still, however, dwarfed by the likes of Facebook and Amazon in the United States.
The Tencent stake has been worth more than Naspers itself for years, and dominated the $103 billion group’s finances. One motivation for spinning off Prosus was to narrow that value gap.
“Essentially you know you’ve been buying into Naspers and getting the 31% stake in Tencent, and then the rest of the business you’re getting for free,” said Morningstar analyst Johann Scholtz.
“Part of the reason for that discount has really been the way that Naspers has become ever more significant to the South African all share index.”
Naspers had accounted for more than 20% of the index.
“Obviously for South African fund managers that creates a massive concentration risk, especially those that manage pension funds,” he said.
Food delivery firms
Prosus also has stakes in fast-growing food delivery, social media and payments companies in China, India, Brazil and Russia.
In the food and delivery sector, it owns stakes in Delivery Hero, Takeaway.com, Latin America’s iFood, and India’s Swiggy.
For the fiscal year ended in March 2019, Prosus reported a 15% rise in revenue to $2.65 billion, and its operating loss narrowed to $418 million from $615 million a year earlier.
Prosus accounts for its Tencent stake as an “equity accounted investment”, which added $3.41 billion to full-year pretax profit.
Prosus’ net profit was $4.25 billion, thanks to a $1.6 billion windfall on its sale of a 10% stake in Flipkart to Walmart.
Jasper Jansen, an analyst at the Dutch shareholders’ rights group VEB, welcomed the listing.
“We love the fresh blood – finally there’s a real company listing here that’s active in the new economy,” he said.
However, he criticised Naspers’ decision to maintain a two-class share structure which gives its biggest shareholders extra voting rights in some circumstances.
Van Dijk responded that the company did not expect to exercise extraordinary voting rights – which would become active if Naspers’ stake in Prosus fell below 50% – in the foreseeable future.