Tencent stock falls as Prosus/Naspers to sell shares to fund buybacks
JOHANNESBURG/AMSTERDAM: Dutch technology investor Prosus NV on Monday (Jun 27) announced it will gradually sell down its massive stake in Tencent, reversing a pledge to retain the holding for a couple of years and knocking shares in the Chinese tech giant.
Prosus will use proceeds to repurchase shares, a move aimed at closing a gap between the market value of Prosus and parent Naspers and the market value of the 28.9 per cent stake in Tencent they own, which is currently worth about US$136 billion.
Prosus itself is currently worth less at about €109.8 billion (US$116.2 billion).
"This will efficiently unlock immediate value for shareholders because we're selling (Tencent) shares at full value and we're buying back our stock at a considerable discount," CFO Basil Sgourdos said.
Prosus shares, which are down 27 per cent in the year to date, jumped 10 per cent on the news to €58.36 in Amsterdam as of 0750 GMT.
Shares in Naspers in Johannesburg were up 13 per cent while shares in Tencent were down 1.5 per cent in Hong Kong.
The share sale plan came as a surprise as Prosus had agreed not sell further Tencent shares after selling a 2 per cent stake worth US$15 billion in 2021.
Asked about whether violating the lock-up pledge was a problem, Sgourdos said no.
"It's something we had to consider in arriving at this decision. (But) we think that this is the right thing for our shareholders. And, you know, we have Tencent support in this decision."
Tencent said it expects the impact of the share sale to be "limited".
"We support our long-term shareholders on their initiative to increase their net asset value per share through a share repurchase program," it said.
Prosus and Naspers shares have fallen sharply over the past year amid a government crackdown on Chinese tech companies.
But Sgourdos said the company is still committed to China.
"We still have a very strong belief in Tencent and the Chinese economy and its ability to grow," he said.
Investors say the complicated cross-holding structure between Prosus and Naspers has also been a factor in depressing their share price.
In addition to Tencent, Prosus houses all of Naspers' overseas investments in online classifieds, food delivery, fintech and education software.
Both the companies reported a fall in trading profit for the full year ending Mar 31, as their portfolio of investments boosted sales while losses increased.
Revenue and profit earned from Tencent dwarf the contributions from Prosus/Naspers' other businesses.
The current discount of Prosus to the value of assets it owns is 54 per cent and Naspers is 65 per cent, according to company-provided figures based on analyst reports and market valuations of their stakes in listed companies.
