Naspers’ CEO defends stake in Tencent

Chairman Koos Bekker countered criticism that Naspers Ltd. relies too heavily on its $132 billion stake in Chinese media company Tencent Holdings Ltd. by reminding investors that they would have been a lot poorer if he’d given in to similar pressure to sell the holding years ago.

“Five years ago there was also a lot of unhappiness,” Bekker told shareholders at the annual meeting in Cape Town, South Africa, on Friday. “If we had sold then, you would have gotten 45 Hong Kong dollars, now you get 325. We are not married to the share, but at this point in time it’s paying shareholders.”

Africa’s biggest Internet company has ridden the coattails of the WeChat creator to be the best performer on Johannesburg’s FTSE/JSE Africa Top 40 Index this year with a 50 percent rise. The catch is that the market values the 33 percent stake in the Shenzhen-based company at almost $32 billion more than Naspers as a whole, suggesting investors don’t see value in the Cape Town-based company’s many other businesses.

Naspers has for years scoured the world looking for another early stage technology company that will eventually replicate the success of Tencent, in which it invested $32 million 16 years ago. The company has since put money into a wide range of assets, including Russia’s Mail.Ru Group Ltd. and Indian travel agency MakeMyTrip, yet last year’s sale of Polish online auction site Allegro for $3.25 billion is one of its few profitable exits.

Bekker said the assumption that Tencent is making money and Naspers’ other ventures are loss-making was “illiterate” as profitability doesn’t accurately capture the value of the businesses. He said the biggest Internet companies grow faster in both China and the U.S. and that the argument for breaking up technology companies is flawed.

“Amazon, for instance, has made losses at times,” Bekker said. “The link between short-term profitability and value is simply not there.”