PROSUS’S share price slipped 1.38 percent to close at R1 210 on the JSE yesterday after hitting a high of R1 257 in intraday trade as the company announced a year-long $5 billion (about R76bn) share buy-back programme.
The tech investor commenced an on-market share repurchase programme of its ordinary shares from its free-float shareholders following its massive share-swop deal with parent company Naspers.
It said this was in support of delivering the overall benefits of the Prosus voluntary share exchange offer to unlock value for Naspers ordinary shareholders.
Last week, Naspers completed a R145bn share-swop deal with Prosus to rebalance their weighting on a number of indices on the JSE, leading to the delayed reopening of trading on the local bourse on Wednesday.
The share swop resulted in Naspers reducing its stake in Prosus from 73.2 percent to 57 percent and retaining its control, while Prosus increased its total issued share capital of Naspers to 45.33 percent.
Prosus, with a primary listing on Euronext in Amsterdam and a secondary listing on the JSE, appointed an intermediary to execute the share buy-back programme within parameters set by it, allowing the execution of the programme during open and closed periods.
During closed periods, the intermediary will make its trading decisions independently from, and uninfluenced by, Prosus.
Prosus said the share buy-back programme commenced yesterday and would end on ugust 19 next year, or sooner if the maximum consideration was reached before then.
“The total consideration includes costs and related taxes. Prosus intends to cancel the ordinary shares repurchased by it under the programme in due course, so as to reduce its issued share capital,” it said.
The group would provide weekly updates on the programme by means of press releases and announcements on SENS, and on its website.
Prosus was spun out of Naspers in 2019 to hold the South African group’s international assets, including its 30 percent stake in Chinese gaming and social media giant Tencent.
Tencent, the world’s largest gaming company by revenue, has seen rising earnings in spite of Chinese regulators having stepped up a sweeping anti-trust clampdown on its internet giants.
Flagship Asset Management fund manager Pieter Hundersmarck said he disliked the Naspers/Prosus groups for their unaligned business structure.
Hundersmarck said Naspers management was enriching themselves by being passive owners of an asset to which they added little value while investing the proceeds of share sales and dividends from Tencent into a swathe of internet businesses where they have shown questionable expertise.
“The Naspers group is suffering from the worst example of the agency problem I have seen in my investing career,” he said.
Hundersmarck said the group continued to trade at an elevated discount to its net asset value, despite management’s various attempts to change this by reducing its stake in Tencent, the listing of Prosus and share buybacks.
He said he expected the complexity of the recent corporate action to dilute the benefits of a greater Prosus weighting in the EuroStoxx 50.
“Poor management is the greatest affliction at Naspers. Downside risks are that management claims they are doing all they can to lessen the discount but have instead made it worse,” he said.
“Capital allocation is unproven, yet management pays themselves handsomely. There are material risks that this will continue to get worse if present management stays in place.
“ESG (environmental, social and governance) concerns around the voting structure are massive, and its continued support by shareholders is astonishing, to say the least.”
BUSINESS REPORT