Naspers rules out change in listing
Exchange controls prevent Naspers from moving its primary listing from SA, where capital outflows are weighing on the internet holding company’s share price, says chief financial officer Basil Sgourdos.
At an investor roadshow in New York, Sgourdos said the group was looking for ways to reduce Naspers’s significant discount to net asset value. The company was trading at a discount of nearly 40%, which was mostly the result of $15bn-$20bn in capital outflows from SA and the group’s 20% weighting on the JSE, which meant "we suffer the brunt of that".
"We’ve done some detailed analysis and for every dollar that leaves SA, it affects our market cap by about $0.5," he said.
Local fund managers could not make up for the deficit, which placed pressure on the stock. This structural issue had arisen over the past 18 months due to "political challenges" in the country.
"There is no easy fix to the JSE problem, unfortunately. We can’t go and tomorrow leave the JSE and go to another exchange – there are exchange controls in place," said Sgourdos.
While other South African companies have moved their primary listings, they had done so through mergers or "in a very different time and under very different regulations".
"Those opportunities are not available now, so we are going to have to think quite smartly about how we deal with this going forward," said Sgourdos.
As shareholders in the business, Naspers’s management team had a vested interest in reining in the widening discount, which was already at levels that were "not acceptable".
To tackle the issue, the group was working towards scaling its e-commerce business and bringing it to profitability, and improving financial disclosures and shareholder engagements.
Another way was to access "new pools of capital" through its American depositary receipt (ADR) programmes.
An idea that had been punted was a secondary listing in a hub such as Hong Kong, where associate company Tencent is listed.
"But a secondary listing on its own does nothing," he said, adding that the ADR listing in London "has done nothing for the discount".
"Thinking about a secondary listing, I think for us the most important priority is, can we access new pools of capital that are otherwise prohibited or restricted from investing in the JSE?" Sgourdos said.
While it would not pursue a secondary listing anytime soon, the group would list some of its underlying businesses "when the time is right".
But Naspers would not unbundle its 34% stake in Tencent as its shares would have to be listed on the JSE. "They can’t be listed anywhere else because you run into exchange controls, so ultimately you take the discount and separate it in two. It doesn’t fix the problem."