Prosus’ R21 billion Stack Overflow disaster

Prosus bought Stack Overflow in August 2021 for $1.7 billion. Three years later, it has written off $1.2 billion, which equates to R21 billion.

Prosus is majority-owned by South Africa’s Naspers and is used as the company’s global technology investment arm.

The story starts on 2 June 2021, with Prosus announcing that it had agreed to acquire Stack Overflow for approximately US$1.8 billion. The final deal was for $1.7 billion.

Stack Overflow was founded in 2008 as an open, community-based question-and-answer website for developers.

It is one of the 50 most popular websites in the world, with a highly engaged developer and technologist community. It serves 100 million people monthly.

Over the last sixteen years, it has expanded to include Stack Overflow for Teams, a knowledge management and collaboration solution.

Stack Overflow for Teams and their extensive community content have become a valuable tool to many enterprises.

At the time of the acquisition, Prosus said its expertise in scaling communities in high-growth markets would help accelerate Stack Overflow’s growth.

It would also help scale the company’s Teams product, positioning Stack Overflow at the centre of product and technology development within major enterprises.

Larry Illg, CEO of EdTech at Prosus, said they wanted to help Stack Overflow Teams expand within enterprises.

Stack Overflow’s CEO, Prashanth Chandrasekar, said the acquisition was “tremendously exciting news for our employees”.

“Prosus is one of the world’s leading technology investors with stakes in companies such as Tencent, Brainly, BYJU’s, Codecademy, OLX, PayU, Remitly and Udemy,” he said.

“Prosus is the perfect company to acquire Stack Overflow, and Stack Overflow is the ideal investment in their focus on the future of workplace learning and collaboration.”

He added that Prosus recognised their platform’s tremendous potential for impact, and they were excited to launch and accelerate their next phase of growth.

What stood out was that Prosus bought the company from the biggest names in the tech VC market, like Andreessen Horowitz, Silver Lake Partners, and Union Square Ventures.

Clearly, former Naspers and Prosus CEO Bob van Dijk and the Prosus team were confident that they knew better than the Silicon Valley giants.

Bob van Dijk, former Naspers and Prosus CEO

Prosus paid $1 billion more for Stack Overflow than its valuation a year before, which showed why firms like Andreessen Horowitz were happy to let it go.

It was not long before it became clear that Prosus, under Van ’s leadership, hugely overpaid for Stack Overflow.

In March 2022, seven months after the acquisition, Prosus reported a $246 million impairment loss on Stack Overflow.

Stack Overflow reported $54 million in revenue and a $34 million trading loss. It was clearly struggling financially.

A year later, in its March 2023 financial year, Prosus reported another major impairment loss on Stack Overflow. This time, it was to the value of $560 million.

In the 2023 financial year, Prosus reported revenue of $94 million and a concerning trading loss of $84 million.

In 2024, Prosus impaired stack overflow by another $372 million. Stack Overflow reported revenue of $98 million and a trading loss of $57 million.

If Prosus sold Stack Overflow at its current book value, it would receive $1.2 billion less than what it paid for it.

The Stack Overflow deal, therefore, cost Naspers and Prosus investors significant amounts of money.

In addition to the $1.2 billion impairment, Stack Overflow has reported total trading losses of $175 million since the acquisition.

This is not the only poor investment decision Prosus made. Numerous other companies have also made big losses with significant impairments.

It was not a surprise when Naspers announced in September 2023 that Bob van Dijk had stepped down as CEO and his board positions at Naspers and Prosus.