Wednesday, January 26

Naspers AGM: A shares have it, all resolutions pass

Naspers ‘high-voting A-shares, which control 68% of Naspers’ votes and are not traded on the JSE, once again ensured that all resolutions from Wednesday’s annual general meeting were passed, despite the strong opposition of shareholders N.

Shareholders A voted 100% for each of the resolutions submitted to the meeting.


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N shareholders were much more demanding in their support.

As in previous years, the compensation policy and implementation report received limited support from the N shareholders, with only 34% supporting each of the compensation-related resolutions.

This continued weak support comes despite Naspers’ compensation committee indicating that it had made improvements to address shareholder concerns.

A shareholder who attended the meeting said the sustained opposition was due to the fact that neither the policy nor the implementation report reflected the reality of the limited liability of the executives involved.


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And in what could be a JSE record, the approval of a general authority to place unequivocal shares under the control of the directors was supported by only 14.62% of N shareholders.

Other resolutions that did not work well included the approval of the general issue of shares for cash (with only 50.97%) and the re-election of Steve Pacak (57.4%), while the re-election of PwC, who has been an auditor from Naspers for more than 100 years, won the backing of just 63.7% of N.

Stock exchange

Shareholders were told during the meeting that it is too early to judge whether the recent complex multi-billion rand Naspers / Prosus share swap has been a success or not.

Naspers CFO Basil Sgourdos was responding to an investor’s concerns about the transaction’s apparent lack of success in achieving the transaction’s key objectives.


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Investor Stonehage Fleming, who manages more than £ 45bn (R926.7bn) in assets worldwide, said that one of the key justifications given by management for the share swap and a key reason for the Discount widening in both the Prosus and Naspers levels were Naspers’ concentration on key JSE indices.

“After the finalization of the deal and the subsequent downgrading and downgrade of the Naspers index, we have seen material further broaden in the discount on both Prosus and Naspers.

“What is management’s opinion on this?” Stonehage Fleming asked.

Sgourdos acknowledged that the discount had been extended shortly after the transaction, but added that this should be seen in the context of a lot of volatility.

“There have been significant changes in the index, so volumes have risen and there has also been volatility in China; We really need to have a long-term view here and allow the share price to stabilize and allow shareholders to liquidate and revalue on time, ”Sgourdos said.

He added that the board remains confident that it was the correct transaction.

“What it effectively does is downsize Naspers on the JSE, which was unsustainable. Naspers was 24% of the index before the transaction, [which] raise the pressure [on shareholders]; I hope that over time it will begin to have a positive impact ”.

An institutional analyst told Moneyweb, shortly after the AGM, that Naspers ‘share price would have to strengthen significantly ahead of Prosus’ share price if there was any hope of improving Tencent’s discount.

“The Naspers / Prosus ratio today is 1.94 times, ahead of the stock exchange, the ratio was 2.19 times and the swap was launched at a ratio of 2.27. Once all funds have balanced their long and short positions, the ratio could be around 2-2.05 times; and once it is set to that type of ratio, we can verify Tencent’s discount, ”the analyst said, adding that any value below two times would indicate an extension of Tencent’s discount.

Chinese uncertainty

Stonehage Fleming also expressed concern about the recent uncertainty of the Chinese government’s policy towards that country’s tech giants. He asked how Prosus management assessed the risk of Beijing taking action against the VIE (variable interest entity) structure underpinning Naspers / Prosus’ investment in Tencent and how the regulatory environment in China impacted the investment case for Tencent.


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Director Charles Searle told the meeting that the VIE structure, which he described as “pioneering,” had enabled Chinese companies to attract foreign investment capital and had played a crucial role in the development of the Internet in China.

The structure allows foreigners to circumvent Chinese regulations that prohibit foreign investment in various sectors (including technology) of the Chinese economy.

“The importance of the role they play is still widely recognized in China,” Searle said.

He added that the situation is monitored at the level of shareholders and companies. “Certainly, we are not aware of any proposed changes that may be in the pipeline in relation to VIEs.”

On the subject of recent regulatory moves targeting China’s big tech companies, Searle said at the meeting that Tencent has publicly declared its intention to comply.

“This is in line with its long-standing operating philosophy, which is to ensure compliance where it is needed, and of course we are confident that Tencent can navigate these changes.”

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