Tencent Shares Fall As Biggest Investor Says It Will Sell

Shares in Chinese tech giant Tencent fell 1.5 percent in Hong Kong after its biggest investor, the Netherlands’ Prosus, said it would sell parts of its stake in order to boost its own stock price through buybacks in its own shares and those of its South African parent Naspers.

Prosus’ shares jumped about 10 percent on the news on Monday.

The news came as a surprise as Prosus had agreed last year not to sell any more of its shares in Tencent for another three years after disposing of a 2 percent stake worth $15 billion (£12bn).

Naspers said it would “begin selling small numbers of ordinary shares…regularly and in an orderly manner” to fund repurchases of its own stock.

Tech carnage

The move is aimed at reducing a valuation discrepancy that sees the shares of Prosus and Naspers trading at less than the value of their holdings in Tencent.

The discrepancy has worsened this year with a sell-off in tech stocks amidst tightening economic conditions.

Prosus said in its annual results, also released on Monday, that it decided to make the move after “the discount to the group’s sum of the parts increased to an unacceptable level”.

Naspers said Tencent was supportive of the policy shift.

Share buyback

It said daily sales of Tencent stock would represent “a small percentage” of average daily traded volume of the shares and that the buyback would “run as long as elevated levels of the trading discount to the group’s underlying net asset value persist”.

Naspers owns Media24, Africa’s largest publishing company, and has other investments in areas such as online classifieds, food delivery, fintech and education software.

It created Prosus in 2019 to close the valuation gap with its massive stake in Tencent, which dates from an early investment made in 2001.

But the valuation gap now affects Prosus as well, which industry watchers say is in part is due to the two companies’ complicated cross-ownership structure.

Internet investments

Prosus wholly owns Naspers’ Tencent stake as well as its global internet investment holdings.

The firm has in the past resisted pressure to spin off the Tencent stake directly to shareholders, and Naspers and Prosus chief executive Bob van Dijk reiterated to the Financial Times that a spin-off was “not in our shareholders’ interests”.

Tencent’s own shares had fallen from a high in early 2021 due to a regulatory crackdown on the tech sector in China, but have rebounded this year amidst signs that the worst of the crackdown is in the past.

Naspers said it remains committed to China.