Since many asset managers and indexes couldn't allocate full positions to Naspers because of its size, its share price has been "trapped" at a discount to its Tencent stake for some time. The Prosus discount to NAV was 33.3%.The listing by South African media conglomerate Naspers of assets including part of its Tencent stake via the new Prosus vehicle in Amsterdam in September was heralded as a way to reduce the deep discount to net asset value (NAV) at which Naspers shares trade.To date, however, that does indeed seem to be the plan.Prosus, he argues, is simply Naspers by another name.Get your free PDF: The 100 most influential Africans, 2019 editionComplete the form for your free download of The Africa Report’s 2019 list of the 100 most influential Africans. The discount has widened appreciably during the recent rally in the Tencent share price. They will now trade in Europe, under a new name. “Both Naspers and Prosus deserve a discount for being holding companies, not controlling their major assets, use of proceeds risk and a venture capital discount,” Artherton argues. This would merely bring Naspers’s market cap into line with the R1.52 trillion value of its 34% stake in Chinese online giant Tencent Holdings. Even after the sell-off, Naspers makes up 14% of the index, which may still be large enough to generate upward resistance to the stock price. Tencent has fallen only about 2%.Naspers does still makes up a rather large percentage of the Johannesburg Stock Exchange. Tencent's stock still hasn't recovered to those levels as of yet. Naspers' discount to Tencent has actually widened since the Prosus spin. If it persists, Naspers management may be forced to spin off more of Prosus, or even break it up further into different parts, such as by separating Tencent from the other companies it owns in food delivery, fintech, and other online classifieds.Oftentimes when a company spins off a minority asset, investors may not have intended or wanted to own that "other" asset, and they may sell the spun-off stock regardless of value.It's only a few days since the spinoff, so I think it's early to jump to any conclusions. And that's not to mention the other $20 billion or so of other assets Prosus owns.It's possible that Naspers' sale of Prosus could be an attempt to increase Prosus' share price.
And the bigger Tencent got, the bigger the discount at which Naspers traded relative to the value of its Tencent stake alone. The rising discount is partly attributable to the stronger rand and investor concerns about probes into MultiChoice’s dealings with news channels ANN7 and the SABC, according to Imtiaz Suliman, portfolio manager at …
Just yesterday, Naspers announced how it plans to solve its problem – and help make its discount go away... Naspers' tech businesses, including Tencent, will leave the South Africa stock exchange. Image source: Getty Images.The Tencent success has come to overshadow Naspers itself, as well as its other investments. This may be temporary, once investors come to appreciate the widening gap between Naspers' valuation and that of Prosus.Naspers' discount to Tencent has actually widened since the Prosus spin.
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