Naspers and subsidiary Prosus in more than 5% intra-day losses
Both companies victims of a global deluge on tech stocks and from their hostile takeover bid of online food delivery Just Eat
Africa’s largest technology investor, Naspers, shaved off about R53bn of its value on Wednesday, joining a global sell-off in tech stocks on worries about a slowdown in the sector while uncertainty about its subsidiary’s buyout offer for UK food delivery service Just Eat added to bearish sentiment.
Naspers was down 5.33% on Wednesday, its lowest close since May, to end the day at R2141.50. Its Amsterdam-listed subsidiary, Prosus, recorded similar losses, losing 5.21% of its value to close at its lowest level since its debut on the JSE and Euronext in September.
Global technology stocks were battered Wednesday after a profit warning by US semiconductor maker Texas Instruments that forecast broad-based weakness across most markets and sectors.
“There have been a couple of warnings from Texas Instruments about weakness within the technology supply chain,” said Peter Takaendesa, a portfolio manager at Mergence Investment Managers.
“Investors trade these technology companies as sectors, so there was a sell-off in the sector. We saw Tencent fell a lot in Hong Kong, and now Naspers is falling at the JSE,” he said. Chinese technology giant, Tencent, which is 31% owned by Prosus, dropped 2.32% in Hong Kong to an almost two-week low.
“The market expects that the sell-off in tech continues more than the next few days or so,” Takaendesa said.
Naspers is now one of the top 10 technology investors in the world, along companies such as Facebook, Google and Amazon. Its strategy is of building Prosus around three pillars: online payments; food delivery; and online classifieds.
Old Mutual Invest portfolio manager Neelash Hansjee said in addition to global sentiment around tech stocks, Naspers may be affected by Prosus’s hostile bid to buy out Just Eat for £4.9bn (R92.6bn). If successful, the deal would create a food delivery business worth up to $12bn, to rival UberEats, SoftBank-backed DoorDash and Amazon-backed Deliveroo.
Prosus is bidding against Dutch company Takeaway.com, which was about to conclude its deal to merge with Just Eat. Some of Just Eat’s shareholders have since rejected the Prosus offer, which could mean having to give a higher offer, risking paying more than it should for the acquisition, Hansjee said. He said the deal makes sense as there seems to be a move to consolidate in the growing online food delivery industry, especially for large global players looking for scale.
“You want to be the company that is consolidating to grow and gain scale, not the other way around. You don’t to be the one that’s competing against the company that’s consolidating,” he said. Prosus has spent about $2.8bn (R41bn) since 2016 investing in the food-delivery sector, with investments including Swiggy in India and iFood in Latin America, in which Just Eat is a partner.
“I think there is some value on the table, if they get Just Eat at that value, it’s a good acquisition to me. But some people are concerned about that, since bidding wars typically do not end well,” said Takaendesa. He doesn't think that Prosus will overpay, given they still need a lot of cash to scale their existing food delivery and classifieds footprint. Naspers’s board has also had a decent track record with acquisitions so far, he said.
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