Dutch technology investor Prosus NV PRX.AS, PRXJn.J on Monday announced it will gradually sell down its massive stake in Tencent 0700.HK, reversing a pledge to retain the holding for a couple of years and knocking shares in the Chinese tech giant.
Prosus will use proceeds to repurchase shares, a move aimed at closing a gap between the market value of Prosus and parent Naspers and the market value of the 28.9% stake in Tencent they own, which is currently worth about $136 billion.
Prosus itself is currently worth less at some 109.8 billion euros ($116.2 billion).
“This will efficiently unlock immediate value for shareholders because we’re selling (Tencent) shares at full value and we’re buying back our stock at a considerable discount,” CFO Basil Sgourdos said.
Prosus shares, which are down 27% in the year to date, jumped 10% on the news to 58.36 euros in Amsterdam as of 0750 GMT.
Shares in Naspers in Johannesburg were up 13% while shares in Tencent were down 1.5% in Hong Kong.
The share sale plan came as a surprise as Prosus had agreed not sell further Tencent shares after selling a 2% stake worth $15 billion in 2021.
Asked about whether violating the lock-up pledge was a problem, Sgourdos said no.
“It’s something we had to consider in arriving at this decision. (But) we think that this is the right thing for our shareholders. And, you know, we have Tencent support in this decision.”
Tencent said it expects the impact of the share sale to be “limited”.
“We support our long-term shareholders on their initiative to increase their net asset value per share through a share repurchase program,” it said.
Prosus and Naspers shares have fallen sharply over the past year amid a government crackdown on Chinese tech companies.
But Sgourdos said the company is still committed to China.
“We still have a very strong belief in Tencent and the Chinese economy and its ability to grow,” he said.
Investors say the complicated cross-holding structure between Prosus and Naspers has also been a factor in depressing their share price.
In addition to Tencent, Prosus houses all of Naspers’ overseas investments in online classifieds, food delivery, fintech and education software.
Both the companies reported a fall in trading profit for the full year ending March 31, as their portfolio of investments boosted sales while losses increased. Read full story
Revenue and profit earned from Tencent dwarf the contributions from Prosus/Naspers’ other businesses.
The current discount of Prosus to the value of assets it owns is 54% and Naspers is 65%, according to company-provided figures based on analyst reports and market valuations of their stakes in listed companies.