Naspers: Implications of the Prosus listing on index weightings

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Naspers unveiled plans in March to list a company (initially referred to as NewCo, but now named Prosus N.V.) on the Euronext Exchange in Amsterdam. Prosus will include all of Naspers’ internet interests outside of South Africa (SA), including its 31% stake in Tencent and investments in mail.ru, OLX, Avito, letgo, and PayU etc. Naspers shareholders can either take up additional Naspers shares or shares in Prosus (a combination of the two options is, however, not allowed). From the point of view of an investor holding Naspers N shares, we highlight the following important terms of the transaction to be considered. Naspers will make a “capitalisation award” which, depending on the option selected, will be either (1) additional Naspers shares; or (2) Naspers “M” ordinary shares, which will convert into Prosus shares on listing. The Prosus option is the default option – if you do not take any action you will automatically get a direct holding in Prosus.

Last week, Naspers shareholders voted overwhelmingly in favour of this listing of international assets (Prosus NV) on the Euronext on Wednesday, 11 September. Because Prosus will be incorporated, domiciled and have its primary listing in the Netherlands, it is expected to be classified as a Dutch company by index providers. This means that Prosus will be entitled to inclusion in developed market as well as SA indices. In addition, as a result of the Prosus listing, Naspers’ weighting in various local and international indices will be reduced.

Naspers’ current position:

The SWIX indices constituents and weightings are calculated based on the following: (a) where the shares are held (SWIX weightings depend on share information that is available on SA’s Strate register [a central securities registry]); and (b) thereafter the standard free float weighting is applied. The weighting will be the lower of SWIX or the free float.

Currently, Naspers has a 97% SWIX weighting i.e. 97% of Naspers scrip is held on Strate. The free float is 100%, so 97% of the shares outstanding are used to calculate Naspers’ weighting in the SWIX All Share Index. This amounts to a market cap of c. R1.46trn and a weighting of 25.8% in the SWIX All Share Index.

In the Capped Swix All Share Index each share cannot have a weighting of over 10%, thus Naspers’ weighting is capped at this level.

We highlight that foreign shareholders account for approximately 57% of Naspers N shares’ 97% weighting and local shareholders for approximately 40%.

Naspers’ position post Prosus listing

Prosus lists in Amsterdam on 11 September. Once this happens it will effectively split Naspers – 75% of Naspers N shares will be listed on the JSE and 25% of Prosus shares will be listed in Amsterdam, with a secondary JSE listing.

The initial listing on 11 September is what is known as a non-trade event in terms of index tracking. This means that the index will contain approximately 75% Naspers N shares and c. 25% Prosus shares so the market cap will effectively be unchanged, and the 97% weighting will apply on both stocks. Then, on Monday, 16 September the elections will become public, and at this point the JSE will be able to calculate the following:

  • The number of Naspers N shareholders that have elected to take up Prosus shares and in the case of the 57% foreign Naspers N shareholders that decided to take the Prosus option, the JSE will have to move those shareholders’ Prosus scrip to the Amsterdam listing.
  • This means that the Prosus scrip remaining on Strate is 40% of the aforementioned 57% register. Assuming that the Prosus take-up is 25% of shares (the maximum allowed is 27%) and that 40% of shareholders continue to hold the shares on Strate, then the SWIX weighting would be (40% x 25%) = 10% of the old Naspers N shares!
  • At this weighting, Prosus would have a 3.1% weighting in the SWIX All Share Index, while Naspers N shares’ weighting would decline from 25.8% to 20.8%.
  • Meanwhile, Prosus’ weighting in the Capped Swix Index would be 3.5%, while the weighting of Naspers N shares will remain at 10%.

The reweighting trade happens in the auction on Friday, 20 September.

At Anchor we can assist Naspers shareholders in taking the most sensible course of action re their Naspers shareholding. Contact us on +27 11 591 0677 or email us at [email protected] for more information.

 

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