By handing over an unresolved issue to his successor, Bob van Dijk. The largest shareholder in Tencent (0700.HK), Prosus (PRX.AS), announced on Monday that its CEO would be stepping down. Ervin Tu, the interim CEO, can recommend more asset sales to increase shareholder returns. However, the Prosus shares’ discount to the value of their underlying assets would continue to be a major issue without a solution for his company’s 25% interest in the $380 billion Chinese e-commerce giant.
Since a 2019 spinoff, Naspers (NPNJn.J), a company based in South Africa, has owned Prosus, a $80 billion Amsterdam-listed entity. As of September 15, the group’s $130 billion portfolio worth was comprised of its 75% ownership of Tencent.
The other portion of Prosus’ valuation comes from an approximately 30% ownership in Delivery Hero, a $8.5 billion company, as well as a mix of listed and unlisted digital businesses that operate in developing economies like Brazil and India.
Prosus shares used to trade at a 60% discount to the value of its listed Tencent shares and other assets, which was a recurring issue for Van Dijk. The enormous tax burden that would be incurred if he attempted to sell the full interest was one of the factors that made it continue. As a workaround, he chose to sell little portions of his Tencent stock and repurchase Prosus stock with the profits. According to share prices on September 15 and the company’s portfolio tracker, a change to Naspers and Prosus cross-shareholdings in June also caused the discount to drop to 40%.
However, the disparity shows how difficult it continues to be for shareholders to value Prosus. Direct acquisition of Tencent shares is preferable for investors. However, the continuance of the discount won’t have helped. Neither Prosus nor the 50-year-old van Dijk provided a justification for his departure.
