Ranmore Fund Management founder, Sean Peche, has slated Naspers and Prosus management for their failure to unlock value for South African savers and investors.
In a series of comments on Twitter, Peche explained why he believes the leaders at Naspers have done a poor job of adding value to shareholders.
Naspers has been trading at a significant discount to its net asset value for years, putting pressure on the management team to unlock value.
One of the strategies to unlock shareholder value was to list Naspers’ Internet businesses separately under the newly established Prosus.
Naspers claimed that it unlocked around R150-billion of value for shareholders through the Prosus listing, but the significant discount remained.
In another attempt to unlock value and reduce the trading discount to its assets, Naspers investors were asked to swap their stock for shares in Prosus in 2021.
This deal did little to add shareholder value and was described as “idiotic” by hedge fund manager Albert Saporta.
“It’s even more idiotic than the creation of Prosus, which was very idiotic,” Saporta told Financial Mail.
“I had never seen a situation where management would create another structure above the holding company to reduce the discount, which is what Naspers did when they created Prosus.”
“Now, two years down the line, they’ve realised it’s not working, and the discounts are higher than before, and they’ve come up with an even more stupid idea — a cross-holding which will happen after the tender is successful.”
Naspers and Prosus management failing shareholders — Sean Peche
Ranmore’s Peche has now provided an even more scathing review of Naspers and Prosus management’s performance.
In April 2021, Prosus sold 192 million Tencent shares, which amounts to 2% of its holding, for $14.6 billion.
Tencent’s share price has fallen by around 20% since then, making it seem like an excellent decision that should be commended.
Not so fast, said Peche.
Prosus agreed not to sell any more Tencent shares for the next three years as part of the deal. This means they suffered a 20% hit on their remaining 29% stake in the Chinese tech giant.
Prosus will also remain exposed to the whims and fancies of the Chinese Government, which has caused hardship for tech giants like Tencent and Alibaba.
The worst part is what Prosus management did with the $14.6 billion it made from selling a portion of its Tencent stake.
Last year, Prosus spent $6.3 billion buying back stock at €89.20. These stocks would cost $5.3 billion today, which means shareholders lost $1 billion.
The management team also spent R53 billion buying Naspers shares at R3,318 each. These shares are now worth R37 billion, destroying R16.5 billion in shareholder value.
In August, Prosus announced a $4.7 billion deal buying Indian payment services provider BillDesk.
Peche said BillDesk’s unaudited management accounts showed a profit of $36.8 million and a net asset value (NAV) of $257 million.
It means Prosus paid 131 times earnings and 18 times the net asset value.
“It must be a small, high-growth business. Nope, apparently, 44 billion payments already take place in India with Billdesk generating $92 billion of total payment value,” Peche said.
Considering the significant transaction value and $36.8 million profit, it equates to a net margin of only 0.04%.
“Hang on, don’t you want businesses with pricing power in an inflationary environment because 131 years is a long time to wait just to get your money back before any return,” he said.
Naspers used the rest of the cash from the Tencent sale to buy more Delivery Hero shares a few months ago.
“According to Bloomberg filings, Naspers/Prosus spent €3.1 billion in 2021 buying 26.6 million shares at an average price of €117 per share,” Peche said.
After a recent trading update, which was essentially a profit warning, Delivery Hero’s share price collapsed to €42.
“This means Naspers is down 64% on its Delivery Hero investment last year,” he said.
Peche said with all these billions disappearing, it is good to keep cash away from the Naspers and Prosus management team.
MyBroadband asked Naspers for feedback about Peche’s comments, but the company did not respond by the time of publication.
Sean Peche Twitter comments
Long term followers know one of my bugbears is Naspers / Prosus Management’s complete failure to unlock value for the SA savers
I don’t read much fiction and that’s a good thing – you couldn’t make this story up
In April ‘21, Prosus sold 192m Tencent shares (2%) for $14.6bn
— Sean Peche (@SeanPeche) February 14, 2022