Can experienced venture-capital investors time a market top in technology stocks?
It is an ominous sign. In the past, Naspers has managed to sell its Tencent shares more or less at market tops, both in March 2018 and April 2021. Just a year ago, it pledged not to sell any more Tencent shares for three years. But then came Monday’s U-turn. Did Naspers take profit from the mini tech rally this month — spurred by market bets that Beijing’s yearlong regulatory crackdowns are over?
Thanks to Beijing’s heavy-handedness, this fear will bubble up on virtually any negative news on China tech. However, it is worth remembering that Naspers has financial considerations of its own — and its actions may not express any views on investing in China at all.
Prosus announced its fiscal-year results Monday, with the market fixated on its widening holding company discount, estimated to be around 55% by UBS Group AG. Selling some of its 29% Tencent stake — now worth $134 billion — which accounts for 77% of Prosus’s value in a sum-of-the-parts analysis, to finance share buybacks could revive its dismal stock performance. Just like what SoftBank Group Corp. has done, share repurchases are an effective way for Naspers to narrow its valuation discount.
Take a look at Prosus’ conglomerate discount over time. Much of the widening gap came this year, long after Beijing’s big tech crackdowns. One factor at play is Prosus’ sizable exposure to Russia. It owns 100% of Avito, an online classified platform, and a 27% stake in VK, or formerly Mail.ru. They are likely worth close to nothing now.
Meanwhile, there is also the Nasdaq meltdown and a near freeze of initial public offerings in tech. According to UBS, Naspers’ stakes in food-delivery and classified-ad startups account for about 17% of its net asset value. How much are they worth now?
Beggars can’t be choosers. When there is a deep valuation discount and pressure from its investors, Naspers can’t really time market tops and must appease with cash handouts instead. For once, don’t read too much into this news clip.
More From This Writer and Others at Bloomberg Opinion:
• Xi Jinping Is Sending Mixed Messages To Investors: Shuli Ren
• Tencent Is a $43 Billion Hassle for Its Early Backer: Alex Webb
• The Eternal Optimism of Masayoshi Son: Culpan and Reidy
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder.
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