Twitter users have reacted to the trading update released by Naspers and Prosus on Wednesday, citing that the new management team of the global consumer internet group has gotten wealthier.
Naspers said it expected its headline earnings per share to slump between 82.1% and 75.1% in the year to March 31 but remains committed to bringing its businesses to profitability by the first quarter of 2025.
Meanwhile, its listed Europe-based subsidiary Prosus said it expected headline earnings a share to decline between 80.9% and 74% for the year to March 31. The financial results of Prosus almost completely account for Naspers’s results.
User Piet Viljoen, a director of several companies, tweeted: “Can't help but give you the full comment on Naspers/Prosus. It's the funniest thing I've read in a long time (And in jest, there is more than a modicum of truth).
“In case you don’t know the story of Naspers and Prosus, it goes something like this… The group makes investments in China many years ago. Investment does insanely well. The new management team inherits a cash cow. The new management team takes cash and incinerates it in stupid deals. The new management team becomes fabulously wealthy along the way. Market shouts”.
He said the new management team didn’t listen, putting in place more ridiculous structures to keep buying time.
“Market shouts more. The new management team eventually listens and buys back shares instead of throwing cash in the furnace. The new management team celebrates this success like it was their own. The new management team becomes wealthier.
“The sale of shares in Tencent and the repurchase of shares by Prosus has created $29 billion worth of value, according to the management team. Of course, what they don’t say is that the value was destroyed by the company in the first place. It should rather say ‘recovered $29 billion worth of value’ – a lot closer to the truth,” he said.
Viljoen said headline earnings per share had fallen by between 73.6% and 80.6%. A lower contribution from Tencent is obviously part of this, with higher impairment charges on the portfolio due to a “market correction in internet valuations” – of course, those were the exact valuations at which they were merrily buying assets during the pandemic.
“Just to confuse you even further, the share price is up nearly 70% over the past year. This is a direct result of the share buybacks closing the gap to NAV, rather than anything to do with performance in the rest of the portfolio. Over 3 years, the share price is flat,” Viljoen said.
As for Naspers, he said, the HEPS story and underlying drivers were all similar to Prosus for obvious reasons. “The share price is up 82%, as Naspers has been a relatively larger beneficiary of the discount closing. Over 3 years, you would’ve made just over 6% in Naspers – in total. Remind me again what this management team gets paid. Actually, please don’t. I have enough to deal with. Another management team feeding on a carcass,” he said.
User @financeGhost wrote in his newsletter: “Just saw a trading update come through from Naspers and Prosus, a group that has specialised in incinerating shareholders value while making the management team fabulously wealthy.
“The five-year returns say it all. But over the past year, punters have done very well thanks to management selling down the Tencent stake and buying back shares. As for the rest of the group's tech portfolio, a ‘market correction in internet valuations’ is stinging,” he said.
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