Naspers to sell more of Tencent stake in bid to revive shares

South African internet giant Naspers, Tencent’s largest shareholder, has ditched its promise not to sell shares in China’s most valuable company as it seeks to fund a buyback to bolster its ailing share price.

Naspers, which owns 29 percent of Tencent through Prosus, its Amsterdam-listed international investment arm, said on Monday that it “will start selling a small number of common shares. . . regularly and in an orderly manner” in order to finance the buyback of own shares.

Last year Nasperswhich is listed in Johannesburg, pledged not to sell Tencent shares for another three years after selling part of its stake for only the second time in decades as it invested money in global internet assets, which include food delivery, payments and Classifieds include.

The move is the latest attempt by Naspers and Prosus to narrow the gap between their ratings and theirs Tencent Mission. It follows a recent rebound in shares of Tencent, which fell from a high in early 2021 as Beijing cracked down on the country’s tech sector.

The failure of Naspers’ stock price to reflect the value of its Tencent stake prompted the group to found and list Prosus in 2019, which now owns the Tencent stake. But the valuation gap is now also plaguing Prosus.

“Tencent supports Prosus’ withdrawal from its voluntary restriction on the sale of its Tencent shares,” Naspers said. Daily sales of Tencent shares “will represent a small percentage of the average daily trading volume of Tencent shares,” he added.

“We can walk [the buyback] for years and on a large scale,” said Bob van Dijk, Managing Director of Naspers and Prosus. He added that Prosus’ net asset value would increase per share with the buyback program, meaning “it will give you more Tencent per share.”

This year’s internet stock carnage caused Prosus’ net asset value to fall and “the discount on the sum of the group’s parts rose to unacceptable levels,” the group said in annual results also released on Monday.

Prosus said its e-commerce businesses grew 50 percent in the year ended March, but profits fell 23 percent to $3.7 billion as the company increased its investments and the value of its Tencent -Investment was affected by the regulatory review in China.

Prosus shares were down a third ahead of Monday’s buyback announcement, sending the stock up another 10 percent in early trading.

The buyback “will continue as long as there is an elevated trading discount to the group’s underlying net asset value,” Naspers said. It will also seek permission from shareholders to buy back up to half of Prosus’ outstanding shares, specifying the scope of the buyback program.

Prosus also announced Monday that it had sold over $3.6 billion to a Chinese e-commerce group Stocks it received from Tencent to boost its investment-grade rating.

Prosus has spent a quarter of the $50 billion it has invested over the past six years on buybacks. Last year, the company invested over $6 billion in internet assets, such as acquiring BillDesk, the Indian payments company.

“We will be cautious about mergers and acquisitions at this point. . . There are good offers on the market, but the downside is that the cost of capital has increased for us and everyone,” said van Dijk. The company has no interest in buying Grubhub, the ailing US grocery supplier, he said.

Naspers has previously resisted shareholder pressure to spin off Tencent’s stake directly to investors, citing high tax bills and long-term strategic goals.

“Getting rid of Tencent is something that we believe is not in the interest of our shareholders,” said van Dijk. Compared to a fork, buybacks are “virtually completely frictionless,” he said.

Naspers to sell more of Tencent stake in bid to revive shares Source link Naspers to sell more of Tencent stake in bid to revive shares

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