It has taken Berkshire Hathaway chairman Warren Buffett over half a century to become the world’s go-to man for large family owned companies seeking a fair selling price and a secure home for their business. This comes via Buffett’s well-earned reputation as a hands-off capital allocator who can be trusted.
South Africa’s Naspers appears to have acquired a similar reputation in the global tech field. It, too, has been well earned. Even before that famous $34m investment in 2001 for half ownership of a Hong Kong startup called TenCent, the South African company was admired as a loyal and supportive shareholder.
Just like Buffett, Naspers buys to hold. Despite occasional clamour from some short-sighted shareholders, it has steadfastly resisted the temptation to cash in its profits. That irritates thrill-seeking traders and sometimes means Naspers shares trade at a big discount to their see-through value of its holdings. But this approach is a massive attraction for entrepreneurs looking for a solid Big Brother.
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It was this reputation of Naspers’s which attracted the world’s leading online food ordering and delivery business which listed on the Frankfurt market on June 30. Delivery Hero introduced Naspers as a shareholder less than two months before the IPO. The SA company’s 10.6% stake was bought for €387m on May 12. Those shares are today worth €485m, a paper profit of almost R1.5bn. And it’s all down to reputation.
Just as instructive is that the owners of Delivery Hero, the latest tech unicorn to emerge from Europe, knew full well they were offering Naspers a bargain. It sold the shares at the same enterprise valuation ($3bn) which other investors paid when buying in two years earlier. That says much considering Delivery Hero was only founded in 2011.
The company could also easily have raised the Naspers-provided capital elsewhere. Its pre-listing share offer was heavily oversubscribed, raising €1bn from investors prepared to pay the very top price of the indicated range (€25.50 a share). Since listing, the stock trades in the open market at a €1 premium to the IPO level.
Virtually all South Africans should be celebrating the continuing success of Naspers. As a result of its scale, Naspers now accounts for around one fifth of the SA market’s most quoted index, the Alsi 40. That rises to a quarter in the popular SWIX, whose weighting is based on the JSE share holdings in the South African register.
Put differently, on average a quarter of the equity portion of every South African retirement fund is invested in Naspers shares. Given this position as the national share market champion, its continued success delivers a halo effect to millions.
A month ago, we republished an astonishing rant by Iqbal Survé on Biznews. Among his nonsensical claims was “Hogg is under the control of his masters in London, including Naspers in South Africa.” For the record, Biznews is 100% owned and funded by yours truly. Naspers, again for the record, did not even respond to my request for an invitation to its recent investment presentation in the UK.
I only mention this to allay whatever impression Survé was attempting to create. It would be wrong to remove any shine from Naspers’ quite incredible achievements. Including its most recent one which, incidentally, generated a paper profit sufficient to repay their entire (unserviced) loan Survé received from State pensioners to buy Independent Newspapers.
Puts it into perspective, doesn’t it?
