Naspers not ready to sell stake in China’s Tencent

Naspers

At its annual general meeting, the message was loud and clear, Naspers will not sell any of its 46.5% stake in China’s Tencent anytime soon.

The ‘riot act’ was loud and clear from Napsers’ chairman Koos Bekker, who said advice has come from various quarters from time to time to persuade the group to sell a substantial stake in Tencent even from people who have not been to China.

From his tone and mannerism, it was a terribly-bad idea. He went further to explain. He explained that the call to sell Tencent stake was among the recurrent themes brandished before the company.

“We started getting that advice from the day Tencent listed in 2004, at the equivalent of less than one HK$ (considering the later share split). Then the shares went to HK$20, then 100. We kept getting the same demand, even from people who had never visited China. For example, had we given in to that advice even 5 years ago, we would have sold at the equivalent of HK$ 45.”

He added that “Except today the price is HK$ 325. Fact is: each time our board evaluated Tencent, we concluded at that moment it’s still the best use for our money. And today we see no reason yet to change.”

Unknowingly to many quarters, Naspers is also fighting other battles within, particularly from:

“From short-term traders to buy back our own shares. Of course such action will spike our share price for a few weeks, then investors will work out that a growth company like ours consumes cash and can’t keep on buying back its own stock. Whereupon the share price will drop back. By that time, of course, the short-term operator that planted this idea would have long ago sold his Naspers shares and run off. And loyal long-term shareholders like you will be left holding the can, which can will then be empty of cash.”

As the largest and most valuable technology investor in Africa, Koos said the company is facing bigger monsters that require more seriousness than selling shares and buying back shares just to please some certain interests.

He went ahead to name those monsters saying “Naspers competes against the likes of Google, Facebook and Amazon – all many times our scale. However, regulators in some markets still think in terms of setting up competitors in each sector in their country. That’s not how things work anymore: we are competing against monsters from North America.”

To this end, Koos called for the support of its shareholders especially those from Africa.

The stake is now worth about USD132 billion. This is a windfall and a war-chest Naspers can deploy at any time should the company start running out of cash from its risky bets. However, this is premised on the assumption that the share price is either stable or continue to rise.

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