Prosus shareholders may well be forgiven for not having followed the rather complicated series of steps by which the Naspers/Prosus Group will eliminate the cross-holding structure that arose when Naspers shareholders were offered Prosus shares in return for a portion of their Naspers shares in August 2021. The logic for this exchange at the time was to unlock value due to the differing discounts to net asset value (NAV) at which these counters traded. Still, the resultant cross-holding structure’s complexity proved highly unpopular with shareholders. When the Group published its latest full-year results in June, it announced plans to undertake a series of corporate actions that would eliminate this cross-holding structure. This step was rewarded by an appreciable narrowing of the discount at the time.
Without going into the detail of all the steps involved and the logic behind them, one of the steps required placing Prosus shareholders in a position where their shareholding correctly reflects the 57% economic interest in the underlying assets of the Group that they had before in that they will be issued with 1.18 new Prosus shares for each Prosus share they hold. Tuesday (12 September) was the last date to trade in Prosus shares and still be entitled to this capitalisation award. As of Wednesday (13 September), Prosus shares are trading ex-the capital award entitlement. The new Prosus capital award shares for shareholders on the shareholder register at the close of trade on 12 September will appear in shareholders’ portfolios on Monday (18 September).
The critical point to appreciate here is that the apparent 55% fall in the Prosus share price on Wednesday (13 September) is merely the adjustment for the fact that shareholders will soon have more Prosus shares due to the capitalisation award than they had before. Once the additional shares are taken into account, the value of their shareholding will be largely unchanged. For those who were not previously Prosus shareholders and may be asking themselves whether this fall in the Prosus share price is a good buying opportunity, it suffices to say that it is no more attractive than was the case on 12 September.