Prosus regains 20 billion market value thanks to Tencent recycling

The Amsterdam tech investor will reduce the large discount it receives from investors by selling chunks of Tencent and recycling them into itself. The announcement puts a turbo on the troubled stock price.

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De technologieholding Prosus

is going to sell small pieces of by far its most important participation, the Chinese social media giant Tencent, on a regular basis. It will use the proceeds from those sales to buy back its own shares.

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The sale of Tencent shares will represent approximately 3 to 5 percent of the daily Tencent exchange volume. They have an ‘open end’. Freely translated: CEO Bob van Dijk does not put a fixed amount on it. But the associated investor presentation makes it clear that billions are involved: in slide 4, van Dijk indicates that a USD 30 billion program could potentially boost the net asset value by 38 percent.

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By purchasing its own securities, Prosus hopes to reduce the large discount compared to the underlying portfolio. For the financial year to 31 March, the group calculates its net asset value at 112 euros per share. The closing price on Friday (53 euros) therefore implied a significant discount of 53 percent.

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The discount is the result of the large interest of one share – Tencent – in the portfolio. Prosus currently owns 2.77 billion Tencent shares, which are worth more than 1,000 billion Hong Kong dollars or 126 billion euros at the current share price. That is more than the stock market value of the Amsterdam holding on Friday evening, 106 billion euros.

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Short-term success: the Prosus share

bounced up 19 percent on Monday and experienced its best trading day since March. About 20 billion euros in market value will be added.

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Prosus announced its purchasing plans in the context of annual figures for its – very turbulent – broken financial year. Group sales rose 24 percent to $35.6 billion, while trading profit fell 10 percent to $5 billion. But that revenue growth is not the focus of investors right now. The focus is mainly on a solution for problem participations such as Avito (Russia), Tencent (due to the regulatory problems in China) and recently also that of Byju’s’, in which Sofina also participates. ‘Unfortunately, there were no comments on these files during the presentation,’ says Joren Van Aken, an analyst at Degroof Petercam. ‘The Russian classifieds site will continue to be included in the net asset value, while we believe that this interest will be virtually impossible to sell to investors outside Russia’.

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Prosus regains 20 billion market value thanks to Tencent recycling

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