Suddenly in the spotlight

The company is receiving attention in China since the sale of shares in Tencent and the uncertainty this has caused

Remarkably, given that it is the single largest shareholder in China’s most valuable company, Naspers has never been given a mention in the media of that country. Until, that is, the day after it offloaded 190m Tencent shares.

“Tencent drops 4% on Naspers’s stake-cut plan”, shouted the headline in the business section of China Daily. For many among the former Naspers board it may have been a chilling confirmation of why they were right to fight to prolong undisputed control over the company; why for so long they treated the N-shareholders as hangers-on with few rights.

For much of the past 15 years it has been important for the Chinese that Naspers did not exhibit all the characteristics of a listed entity; that the executive team and controlling shareholders behind the Tencent acquisition were not susceptible to the normal cut-and-thrust of listed life and that they were not likely to be booted out in a hostile shareholder battle such as that threatened by Jannie Mouton in 2006.

The sale of 190m Tencent shares signalled a change and must have caused a frisson of anxiety among the Chinese partners who had taken an unchanging Naspers for granted. The sale of the shares suggests that for the first time since it listed in 1994 Naspers is paying some attention to its N-shareholders.

Last year’s corporate governance blunders and a new CEO have given the N-shareholders the opportunity to exert some, albeit extremely limited, authority.

The China Daily headline told the story of precisely why there had been so much opposition to this. As China saw it, the move led to short-term uncertainty, which was accompanied by share price weakness.

And as it turned out, given the share price moves since the sale, it may be that the old guard should have been allowed to continue to ignore the concerns of N-shareholders. It’s possibly just bad timing, but for many readers of China Daily the sale looks as if it could have been triggered by weakness in the Tencent share price and that it reinforced that weakness.

Furthermore, if the Naspers board believes the sale puts an end to shareholder demands, at least for the three-year period it has imposed, it is in for a rude awakening.

Albert Saporta, a director of Geneva-based investment advisory firm AIM&R, who has been an outspoken critic of Naspers’s handling of the discount, welcomed the sale, describing it as a “small step” in the right direction.

“It would have been better had they distributed the cash to investors as a special dividend or a share buyback and committed to sell down the stake regularly until the discount shrinks substantially,” he says.

Saporta, who has called for Naspers to spin off the Tencent stake to Naspers shareholders, believes there will be more share sales before the self-imposed threeyear deadline is reached. “My view is once you start the process, it will not stop until the discount has shrunk and investors are pleased, so I think more is to come,” Saporta tells the Financial Mail, perhaps confirming Chinese concerns about a new era of uncertainty.

The N-shareholders are right to exert some influence, but moving too aggressively could spark retaliation from their Chinese partners. Apart from this uncertainty there is much good news on the Tencent horizon. Not least is that despite new numbers of users reaching a plateau, the existing users are spending more time on their smartphones using one of the seemingly unlimited array of Tencent apps.

Albert Saporta

Tencent