According to Fin 24, this is good news for a number of fund managers concerned about the tech giant’s weighting in the main local index.
After Naspers lists its unit Prosus NV in Amsterdam on Sept, the company will drop to about 15% of Johannesburg’s equities benchmark from a massive 21% currently Peter Takaendesa, a Cape Town-based fund manager, estimates.
The role Naspers plays in the widely tracked Shareholder Weighted TOP 40 Index, known as the Swix, is even more exaggerated, at about 25%. That should fall to around 18%, he said.
“So, a lower weighting helps a bit with the concentration risk, giving investors some breathing room,” said Takaendesa, whose Mergence Investments oversees about 35 billion rand ($2.3 billion) for clients.
“If developed-markets investors like Prosus, the spin-off of the company will help narrow the discount between the firm and its underlying assets from the current 35%-40% range, which will benefit Naspers shareholders over time,” Takaendesa said.
South African managers who passively follow the Swix are typically prevented from having more than 20% of their fund invested in one stock, meaning they can’t fully replicate moves in Naspers and often have to sell when the share does well and busts through their thresholds.
Prosus, which will house Naspers’s 31% stake in Chinese internet colossus Tencent Holdings Ltd. along with several other technology investments, should be valued at around $100 billion when it starts trading in Europe, the Cape Town-based company estimates.
Olwethu Notshe, a money manager at Sentio Capital, said “In the longer term, because foreigners don’t have to access Tencent via Naspers on the JSE, it could result in lower activity, as foreigners will likely be more active on the Amsterdam bourse to access Tencent.”
The Johannesburg exchange declined to give any estimates of the change in Naspers’s weighting or a date when the re-weighting would happen.
Naspers will keep a stake of at least 73% in Prosus, which will be the third-largest company by market capitalization in Amsterdam.
Prosus is likely to be added to developed-market indexes and may attract investors prevented from holding Naspers because it trades on an emerging-market exchange.