The big misses
If Naspers bought the stock of the century in Tencent, who was unlucky enough to sell it?
Two investors exited Tencent in 2001: IDG Technology Venture Investments (which is now part of IDG Capital and was an early venture capital player in China) and PCCW, a Hong Kong-based telecoms company.
IDG Capital, through its founder Patrick McGovern and subsidiary International Data Group (IDG), has a history in publishing in common with Naspers. In the 1960s it launched Computerworld, the first news weekly for the IT industry.
IDG followed with more publications, such as InfoWorld (1978), PC World (1983) and Macworld (1984). The group eventually reached 90 countries with 300 print publications and 450 websites.
In the 1990s it started the popular “Dummies” series of how-to books (Windows 95 for Dummies, for instance). Ironically, it would later publish Doing Business in China for Dummies.
IDG Capital and PCCW held equal stakes in Tencent. It’s not clear how much IDG Capital initially paid for its stake of nearly 25% in Tencent. But it was happy to exit in 2001, according to former Naspers executive Hans Hawinkels — provided PCCW also sold its stake.
For months, Hawinkels tried to get the telecoms provider to sell. Eventually he was offered the stake at a company
valuation of $66m, “no due diligence, take it or leave it”.
Naspers took it.
PCCW and IDG Capital each got $16.5m for their stake in Tencent. PCCW today has a market cap of $4bn; Tencent’s is north of $730bn. It’s a big miss.
But Naspers has also passed on deals that, in retrospect, would have been good.
“We had significant discussions about acquiring a stake in NetEase,” says Hawinkels. But Naspers wanted a more sizeable stake than the 10% on offer, so it never invested. Today the Chinese online content provider is worth about R1-trillion.
Naspers also had an investment in 21Vianet, a web-hosting start-up that has pivoted to provide data centre services.
But the euphoria for tech stocks that dominated markets at the turn of the century didn’t last. After the dot-com bubble burst, Naspers exited investments in start-ups such as 21Vianet, which is now worth more than R50bn.
In 2002, Naspers chair Koos Bekker decided not to renew Hawinkels’s contract. But Tencent will be remembered as the greatest find an SA company has made abroad. x