Prosus CEO Bob van Dijk has purchased R155m worth of company stock, betting on his own plans to build a global e-commerce juggernaut beyond its money-spinning stake in Tencent.
“Buying more Prosus shares reflects my personal conviction that our businesses have had exceptional momentum and that their value is not at all reflected in the stock,” Van Dijk said in a statement. “This is the best opportunity for value creation I know.”
Van Dijk bought 122,750 shares in the Amsterdam-listed company at an average price of €71.89, which translates to about €8.8m (R155.8m) on the open market. Shares in Prosus ended little changed on Monday.
The transaction comes as the group’s share price has fallen over the past year mainly because of pressure from Chinese authorities.
Naspers and Prosus face two main issues.
First is that most of their value comprises Prosus’s 29% holding in Chinese internet giant Tencent worth $159.2bn (about R2.48-trillion), indicating that investors ascribe little value to the rest of the portfolio, which is estimated to be worth as much as $50bn, or about R782bn.
Since he took over in 2015, Van Dijk has faced investor pressure to address this financial inefficiency, prompting him to come up with a number of corporate actions ranging from billions of rand in share buybacks to the separate listing of Prosus in Amsterdam.
But the measures have done little to convince investors that Prosus is more than its stake in Tencent, which at times can be worth more than Prosus itself. Van Dijk’s latest plan to attract investors to Prosus has been mergers & acquisitions, buying two in-profit e-commerce companies that took its spending spree well over R100bn.
The second weight on the Prosus share price may be beyond Van Dijk’s control. The share has been under pressure since July 2021 when China launched a widening crackdown on technology companies, including Tencent. The crackdown led to the cancellation of the $37bn listing of Ant Group.
The value of Prosus dropped almost a fifth in 2021, wiping off more than R400bn as investors continued to worry about the safety of their capital in the Asian country amid the crackdown. Naspers and Prosus fell about 18% in 2021, wiping more than R700bn off their combined value. In the same period, Tencent lost 19%.
China’s regulatory assault on the tech industry, which had free rein for much of the past decade, not only raises questions about short-term profit and a share price hit but has put investors on edge that trillions of rand in investments could be wiped out with the stroke of a pen.
One of the biggest worries for investors is that Beijing may no longer allow technology companies to use an opaque corporate structure called a variable interest entity (VIE), a structure many Chinese companies have used to sell shares to foreign investors.
The Chinese government has neither condoned nor explicitly repudiated the structures that allow investors like Prosus to receive dividends from the mainland company while having no legal claim on its assets.
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