Naspers on Thursday said it would sell as much as 190 million Tencent shares, equal to 2 percent of Tencent's total issued share capital, cutting its holdings to 31.2 percent. It's promised not to sell more shares in the next three years.
The sale was Naspers's first disposal since it had the smarts to invest in Tencent as far back as 2001, when the Chinese firm was an obscure internet company. Since then, Tencent — operator of the popular WeChat messaging service — has soared in value. As of Thursday's close, Naspers's 33 percent stake in Tencent alone was worth over $175 billion, eclipsing Naspers's own entire market cap of $121 billion. In other words, investors essentially value Naspers's Tencent stake at a discount and its other holdings at less than zero. By selling its stake. Naspers is telling the market that it doesn't deserve this steep conglomerate discount.
Shares of Naspers tumbled as much as 9.5 percent after news of the sale, the most since 2008, perhaps because of the company's promise that more disposals won't be in the offing soon. As Gadfly has argued in the past, it will be difficult for Naspers to close its valuation gap, in part because of its size relative to its home market in South Africa. But at least it is now trying.