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‘Overwhelming’ majority of Naspers shareholders to opt for Prosus shares

Sep 11 2019 11:44
Helena Wasserman

It looks like most Naspers [JSE:NPN] shareholders will take the immediate capital gains tax hit and opt for Prosus shares instead of getting more Naspers shares.

Prosus shares made a strong debut in Amsterdam and Johannesburg on Wednesday. By late morning, shares in the Naspers spinoff were trading at 74.50 euro – 27% higher than the “reference price” of 58.70 euros (around R950) was fixed for the share.

Basil Sgourdos, chief financial officer of Naspers, told journalists on Wednesday that, so far, the company is seeing an “overwhelming move” towards Prosus shares.

Naspers shareholders were issued with new Naspers M shares on Wednesday morning, which are equal to one Prosus share for every Naspers share. They have until Friday to choose whether these should be converted into Naspers shares instead. For South African investors, accepting the Prosus shares will mean an immediate capital gains tax charge.

Usually, it makes sense to defer paying capital gains tax for as long as possible, notes Matthew Stroucken, portfolio manager at Anchor.

But he argues that investors should consider opting for Prosus shares because there is a strong possibility that the Naspers’ discount to its net asset value may widen over time. This is because Naspers will now be a double holding company - it will hold Prosus, which will hold Tencent - which could maintain its discount.

Also, Naspers will remain a dominant share on the JSE, which causes concentration problems on the local market – pension funds, for example, have restrictions around how much they can invest in a single share. Lastly, there is a strong risk that capital gains tax will rise in coming years. So the tax rate you pay now, may be lower than in future, Stroucken argues.

Prosus is now one of the top ten global consumer tech companies of its kind in the world, and the biggest in Europe.

It is the third-largest company on the Euronext bourse in Amsterdam, but in terms of shares available to trade, it’s the eight-biggest.

Sgourdos says the 25% of shares available to the market provides “meaningful liquidity”, and trading was brisk on Wednesday morning, with more than 3 million shares changing hands. However, the company will monitor the situation and if required, consider “sensible” options, including issuing more shares.

* Fin24 is part of 24.com, which is in the Naspers-owned Media24 stable.

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