Insurance plan from Naspers

For the last few weeks, the Prosus team has been working hard to persuade anyone with the time to listen that there was a compelling reason for it to be hived out of Naspers and listed separately on the Amsterdam Stock Exchange.

It’s likely that awarding a really generous remuneration package to the team members and their expensive hangers-on was only part of that reason.

The main reason was to reduce the hefty discount between Naspers/Prosus and Tencent; this, so the story goes, would be achieved by Prosus building up its own portfolio of businesses.

A year is obviously too short a period to determine whether or not the strategy will be successful, but the signs aren’t encouraging.

Prosus has failed to secure two eye-poppingly expensive acquisitions (even more expensive now), and the discount has grown.

The grim reality for one-year old Prosus is that, on the basis of all we know, there is little to no chance its leadership team – no matter how much it’s paid – will weld together a collection of internet-based investments that could match what is being welded together by Tencent.

Even if a lot of the estimated 700-plus companies Tencent has invested in fail, there is still considerable scope for continued great success.

And it would be a level of success several times more impressive than the most successful scenario Prosus could hope for.

Tencent is at the very centre of the global metaverse; Prosus is on the edge trying to pick up scraps.

Gap widening

No matter how fast the Prosus team runs to chase down the discount, the Tencent team will be running considerably faster driving it up.

Being the internet, there might of course be some totally unseen and currently unseeable scenario that could play out in the coming years and make it all worthwhile for Prosus and its shareholders.

But without being able to see that, it does seem that right now the best explanation for the existence of Prosus is as a form of insurance.

It is insurance against the world as we know it being upended.

Insurance against President Xi Jinping deciding one day that China does not need the rest of the world that much after all and opting to challenge the ownership of 31% of one of the country’s most important national champions.

That’s the stake that currently rests with Prosus.

That might sound more like a President Donald Trump manoeuvre than something the more grounded Xi would contemplate, but the Chinese president – a noted nationalist – seems increasingly willing to incur the ire of international leaders and pursue what he perceives are his country’s own interests at any cost.

Xi’s inclination to take a tougher stance in the global economy is currently evident in Beijing’s growing use of what was described in a recent Financial Times column as a policy of “coercive commercial diplomacy”.

This sees Beijing blocking imports ostensibly because of safety or other concerns.

This article first appeared on Moneyweb and was republished with permission.

For more news your way, download The Citizen’s app for iOS and Android.