Even as bitcoin and other digital currencies have shot up in value over the past year, attracting speculators and even global institutional investors, Naspers and its international arm, Prosus, are staying away out of the fray until the cryptocurrency can demonstrate viable returns.
After years of being regarded as a fringe asset class, detestable to some due to its perceived association with the buying and selling of illicit goods on the dark web, bitcoin — the world’s largest and best known cryptocurrency — has washed off much of its dirty image and is fast becoming mainstream.
In the past 12 months, bitcoin has risen by just more than 800%, going from $7,300 (R106,414) as the world went into lockdown in April last year, to about $58,500 now.
But even that has not been enough to entice Cape Town-based Naspers, after Prosus received a huge cash injection last week, selling a 2% stake in China’s Tencent for $14.6bn. The group has no plans to make any sizeable investments in cryptocurrencies, choosing rather to allocate capital to business models that it deems viable and can provide steady returns at scale.
“We’re not going to allocate meaningful capital right now to cryptocurrencies,” Naspers CFO Basil Sgourdos told Business Day.
“It’s really hard to ascribe value to bitcoin. I mean, how do you determine what is a fair price for bitcoin today? You don’t have a mature enough market. Once you do and can express a very clear view, then we can revisit that but anything at this point is a punt and we’re not punters.”
“We invest capital in things that we have conviction behind and where we see a clear path to a good return on a sustained basis. And we just don’t have that level of confidence yet in bitcoin and other cryptocurrencies,” Sgourdos says.
As a group, Naspers is primarily invested in classified, fintech and food delivery, with recent forays into health and groceries.
Despite its stance on bitcoin, Naspers is no stranger to the cryptocurrency sector. For a number of years, the group backed SA-born Luno, which has grown to become the country's largest cryptocurrency exchange, competing with firms such as VALR and AltCoinTrader.
Last year, Digital Currency Group (DCG), a US-based blockchain investor, bought Luno from a group of investors that included Naspers and Rand Merchant Investment Holdings.
Blockchain, which underpins cryptocurrencies such as bitcoin, is a system of recording information that makes it difficult or impossible to change, hack or cheat. It is essentially a digital ledger of transactions that is duplicated and distributed across a network of computers.
Sgourdos argues that they are not opposed to investing in cryptocurrency or blockchain-based businesses. The issue is investing in a specific coins or digital currencies.
“Luno is different. It’s an exchange,” he says. “We didn’t sell them because we didn’t like them. We sold because that’s what they asked us to do. They found a new home, a new place and the new guys wanted to own all of it. They’ve done well for us, so we were happy to support that management team.”
“These exchanges have value and will be relevant over the long term,” said Sgourdos.
For analysts, Naspers’ stance makes sense, given the conservative nature of the business and its approach to investing over the years.
Peter Takaendesa, head of equities at Mergence Investment Managers, does not think investing directly in bitcoin or another cryptocurrency fits into Prosus or Naspers’ current investment policy.
“The group appears to be more comfortable with investing in platforms that enable the trading of goods and services by leveraging their large internet user bases,” he said, adding that these platforms are used to sell third party and internally developed products or services such as online games and other forms of digital entertainment.
“They are therefore likely to prefer investing in a crypto trading platform such as Luno than investing directly in bitcoin,” Takaendesa said.
To keep close to the action in some way, Naspers has rather chosen to invest in companies that are using blockchain technology.
“We’ve mainly got investments in blockchain companies, not necessarily crypto companies, so those using blockchain to build businesses,” says Sgourdos. “There’s a blockchain online games company that we hold a stake in, and a couple of others.”
“There’s quite a way to go still before the technology matures enough so that you really scale and build businesses. It’s not a matter of ‘will it’. It’s more a matter of ‘when will it be’. So we continue to stay close,” he says.
Despite other large international technology players such as Elon Musk’s Tesla ploughing $1.5bn into bitcoin in February, the expectation is that Naspers will largely stay out of the market.
Takaendesa doubts that there are many large global companies or institutions that see cryptos as “alternative reserve assets” to their cash or gold reserves. He noted that Tesla had to update its investment policy recently to make its bitcoin purchase, saying it was unlikely that Naspers and Prosus will do the same.
“Even in the unlikely event that Prosus also updates its investment policy to include cryptos, we would be surprised if their investment in such assets will make up more than 1% of group investments,” he said.
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