A week after writing down a R12bn asset in Russia, Naspers on Monday lost multiples of that in its valuation as it was confronted by an old problem: a crackdown on technology companies in China where it has its most prized asset.
Africa’s most valuable company had its largest one-day drop on the JSE in more than two decades, losing more than R100bn in value. That came after Chinese internet giant Tencent was battered by a report that its mobile payment and digital wallet service WeChat Pay faces a record fine for allegedly violating money laundering regulations in China.
By the close of trade, Naspers shares had fallen 13.12% to R1,535.53, its biggest drop since November 2000, before the company acquired Tencent in a deal that transformed it into a global technology heavyweight. The share slide on Monday left the company with a valuation of R676.41bn.
Shares in Prosus, its global technology investment arm, slumped 11.42%. That contributed to a broader decline in the JSE, with the all share index falling more than 2.5%.
Tencent was down 10.7% in Hong Kong, while the Hang Seng closed 5% weaker. Chinese stocks in Hong Kong, which had their worst day since 2008, were also hit as the country suffered its worst Covid-19 outbreak since the emergence of the pandemic, prompting concern of more lockdowns.
Naspers chair and former CEO Koos Bekker’s $32m bet in 2001 on a little-known Chinese technology firm is said to be possibly among the most astute anywhere. More recently, it has presented a headache for current CEO Bob van Dijk as he struggled to close a valuation gap between that investment and the rest of the company’s businesses, to which the market ascribes no value. Then Tencent was caught up in a wider crackdown by China’s authorities, which has also ensnared the business empire of Alibaba founder Jack Ma, leading to the cancellation of a proposed $37bn listing of his Ant Group
The latest headache for Naspers came as the Wall Street Journal reported that WeChat Pay was accused by China’s central bank of violating rules against money laundering. The People’s Bank of China had found Tencent’s payments platform allowed the transfer of funds for illicit purposes, such as gambling.
Through Amsterdam-listed subsidiary Prosus, Naspers is the largest shareholder in Tencent, with just under 29%. Investors in the company have lost 60%, or about R1-trillion, of value since its January 2021 peak. The group’s fortunes are of interest to South Africans because its size means almost everyone with a pension fund has a stake in the company.
The latest developments indicate how China still poses a bigger risk to the company, despite its exposure to Eastern Europe making headlines recently because of the conflict in Ukraine.
Earlier in the month, Prosus wrote down its $769m stake in Russian social networking platform VK Group and vacated its board seats, joining a host of companies and investors tallying up the losses from Moscow’s invasion of Ukraine. The group also has 4,000 employees in Russia through its Avito classifieds business and 350 people in Ukraine at OLX.
Peter Takaendesa, head of equities at Mergence Investment, said the declines in Tencent suggest it may get a bigger penalty than the $2.75bn imposed on Alibaba in 2021.
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