Prosus's CEO Plans to Stick to China Despite Global Tensions

Prosus currently holds about 26% of Tencent, a stake valued at roughly $112 billion. The company, which has been slowly selling its stake to fund a buyback, said it expects its Tencent stake to shrink 2 to 3 percentage points a year while the buyback continues, ending this year around 24% to 25%.

Prosus CEO, Bob van Dijk, expressed confidence in Tencent's business and the potential of China's consumer internet industry. He said that unlike other companies, Tencent's business is domestically focused and less susceptible to international tensions. “It’s not as if they’re selling hardware to the U.S.”

Prosus has a long-standing relationship with Tencent, having made a significant investment in the company in 2001.

Other investors in Chinese companies have become more cautious and scaled back their investments, but Prosus remains committed to Tencent.

Prosus relies on Tencent's dividends for its financial performance and finds it challenging to identify investment opportunities as lucrative as Tencent.

In June 2022, Prosus said it would slowly sell its Tencent shares to fund buybacks of its and Naspers’s shares, scrapping a promise that it wouldn’t sell stock in Tencent until 2024. The move was aimed at helping address a valuation gap between Prosus and the value of its stake in Tencent.

Tencent’s market capitalization is equivalent to about $430 billion. Prosus’ stake in Tencent, valued at roughly $112 billion, is more than the entire market capitalization of Prosus, equivalent to about $95 billion. That is despite a net asset value, based on Prosus’ listed assets and consensus from 17 analysts for unlisted assets, of $146 billion.

The Naspers and Prosus buybacks don’t solve the structural issue of the discount, but they give shareholders value by purchasing stock at a discounted price relative to the actual value of the Tencent stake, Prosus executives say.

Tencent stated that the shares sold by Prosus as part of the buyback represent only a small fraction of its average daily trading volume.

“We love it,” van Dijk said of Tencent.