Naspers is not running away from South Africa

There is a perception among ordinary South Africans that the unbundling of Naspers’ international assets and subsequent listing on Amsterdam’s Euronext bourse is simply an elaborate ruse to offshore assets. Such is the level of cynicism and distrust in South Africa.

Those who inherently distrust business question Naspers’ motives. Is the company semigrating they wonder? After all, the likes of South African Breweries, BHP Billiton and others achieved this back in the late 1990s.

Those whose faith in business leadership has been shaken wonder whether the directors and other Naspers insiders haven’t used this as a vehicle with which to offshore a portion of their capital. After all, 6.5% of the company’s ordinary N-shares are owned by directors and other ordinary South Africans. That is almost R1-billion worth of shares, a pretty penny by anyone’s accounting.

The reality is that yes, Naspers is offshoring some of its assets and yes, individual shareholders will be able to sell their shares in Amsterdam, in the process offshoring capital, and yes, the JSE may also see trading volumes lessen as trade moves to Amsterdam.

But perspective is needed. While Naspers is indeed listing its international assets offshore, including its valuable stake in Tencent, the reality is just 27% will be carved out unbundled to shareholders.

It will continue to hold the balance, about 73% of Prosus, the Amsterdam vehicle, and it will retain its primary listing on the JSE.

The Prosus reference price allows the Euronext to set upper and lower price limits and does not imply a valuation on Prosus; rather it is a number that will be derived from the closing price on the Tuesday before listing, converted to euros and divided by the number of Prosus shares. The share price will ultimately be determined by supply and demand.

Thus, about 25% of Naspers’ R1.5-trillion market cap will be listed in Amsterdam, with a secondary inward listing on the JSE. That translates to about R386.7-billion listed offshore on the Euronext and inwardly on the JSE.

Two shareholder registers will be maintained, one in South Africa and one in Amsterdam. However, shares will be fungible, in other words mutually interchangeable. So, yes, shareholders will be able to sell their shares in Amsterdam, for euros.

Of those shareholders, 54% are foreign institutions that will probably elect to hold Prosus shares in Amsterdam rather than in Johannesburg. Domestic institutions, including Naspers’ largest shareholder, the PIC, hold 29% of Naspers shares. They can choose to use their offshore allowance to hold their Prosus shares in Amsterdam but will most likely reserve this for other investments, rather holding Prosus on the JSE.

Retail investors hold 6.6% of the company; of this Naspers’ directors hold 1.58% or 6.9-million ordinary shares. These shares will be listed on the JSE via the inward listing and held in the South African share register. There is nothing stopping these shareholders from selling them in Amsterdam.

However, as was the case with Steinhoff, the SA Reserve Bank will keep a beady eye on these sales, which will form part of shareholders’ annual forex allowance.

Source: Naspers annual report, 2019

The listing was in response to shareholder complaints that Naspers’ weighting on the JSE was too big and that the discount between the price and the company’s net asset value was too big.

While shareholders are optimistic, whether the listing will bring the company’s market capitalisation (share price multiplied by the number of shares in issue) more in line with its net asset value is something that remains to be seen.

The unintended consequences also remain to be seen.

“At this point, no one really knows what the impact of this listing will be,” says the JSE’s outgoing CEO, Nicky Newton-King.

“The bottom line is that Naspers had become too big for SA indices and that had created its own issues. I think this is an elegant solution and a good way of unlocking value.”

Naspers alone accounts for about 25% of the JSE’s market capitalisation. This will fall to 15% after the listing. BM