Naspers and its Amsterdam-based subsidiary announced an update on their convoluted open-ended repurchase programme, through which they aim to unlock ‘immediate value’ for shareholders.
Shares in Naspers and Prosus surged by almost 5% on Wednesday after the companies announced an update on their open-ended repurchase programme, through which they are offloading Tencent shares.
The programme, announced on 27 June 2021, is aimed at “efficiently” unlocking immediate value for shareholders and increasing NAV [net asset value] per share over time.
In essence, the buyback programme allows Naspers-Prosus to fund other businesses (mostly startups, although the group said it has adapted to the new market realities by setting higher targets for M&A returns) around the world through dividends from Tencent, which suffered declining revenue for two consecutive quarters last year.
Prosus currently has a 26.9% stake in Tencent, down from 28.8% (worth about $128-billion) in June 2022.
‘Committed’ to Tencent
On 23 November, during the diversified media and technology group’s interim results announcement, CEO Bob van Dijk said they had invested heavily in some of their divisions and offloaded risky stakes in others, but were “absolutely committed” to remaining a very large shareholder in Tencent for a long time to come.
He said they were accelerating their path to profitability and that repurchasing their own stock was a “great use” of their capital: “Investing in Tencent and our own e-commerce portfolio at a 40% discount significantly improves NAV per share and creates permanent value that will compound over time.” Van Dijk said $15-billion of value had been created on announcement of the programme.
Earlier in November, Reuters reported that Tencent had planned to distribute $20-billion of stock in meal delivery giant Meituan in 2023, which triggered a selloff of Chinese internet stocks as investors feared more divestments by the online gaming business were in the offing.
The Chinese government cracked down on local tech giants last year for anti-competitive behaviour, which hit tech stocks hard, wiping billions of dollars off the value of giants including Alibaba, Baidu and Tencent, with the companies posting their slowest growth yet.
The Reuters report suggested the JD Group and Meituan dividends were likely to be aimed at buying goodwill with the Chinese government.
In effect, the Meituan plan meant a R100-billion boost for Naspers.
Naspers had already disposed of the JD Group in June last year, raising $3.7-billion from the sale.
But on Wednesday, Bloomberg reported Chinese shares were off to a strong start in 2023, as fears of ...