Credit：Visual China

Prosus NV, a Dutch technology investment company owned by South African internet group Naspers, said it expected to cut stakes in Tencent by two to three percentage points annually amid its ongoing buyback program, and to hold about 24% to 25% shares of the Chinese tech giant by the end of this year, down from holdings of 28.78% prior to an announcement of stake sales in June last year.

Prosus wants to “stay long-term shareholders in Tencent”, the CEO Bob van Dijk told the Wall Street Journal recently. The chief executive said his company feels confident in Tencent’s business and holds bullish view on China’s consumer internet industry. He believes Tencent has less risk of scrutiny overseas than other Chinese firms since it focuses more on domestic business. “What they do is much less vulnerable to tensions than other companies,” he said. “It’s not as if they’re selling hardware to the U.S.”

Prosus CEO’s pledge of focus on China came as China’s regulatory tightening on tech industry is winding down. Earlier this month, financial regulators announced end of a years-long regulatory revamp on Alibaba’s fintech affiliate Ant Group with nearly US$1 billion in penalties. The China Securities Regulatory Commission (CSRC) said most of outstanding issues in the financial business have been addressed at the moment, so authorities now shift regulatory focus to regularized supervision.

At a meeting held on the heels of ending of regulatory overhaul of Ant Group last week, Chinese Premier Li Qiang called on online platform operators to better empower the real economy, create jobs and proactively fulfill their social responsibilities. Li encouraged these companies to maintain confidence, keep innovating and improve their international competitiveness. Li stressed that governments at all levels should strive to create a fair market environment for competition and improve policies on investment access and security assessments for new technologies and businesses. The governments should also optimize the transparent and predictable regulatory systems to reduce the compliance costs of those enterprises and promote the sound development of the industry, Li added.

Nasper spent US$32 million to acquire a 46.5% stake in Tencent back in 2001, three year before the WeChat owner went public in Hong Kong. The investment brought the media company a more than 700,000% profit in the past two decades. Prosus’ stock sale started about a year ago. Naspers and Prosus announced on June 27, 2022 that they were going to sell Tencent shares orderly to fund a long-term open-ended buyback program, which would run as long as elevated levels of the trading discount to their underlying net asset value persist.

Naspers expected the on-market sale of Tencent shares would be just a fraction of the average daily traded volume of Tencent shares. For example, had Naspers and Prosus executed the repurchase program over the last three months within European regulatory limits, the Tencent Shares that would have been sold on a daily basis should be, on average, not more than approximately 3-5% of average daily traded volume.

Naspers and Prosus said in June 2022 that both of their boards had great confidence in Tencent’s long-term prospects. Prosus said the repurchase programme had been designed to manage the number of its shares and shares of its parent that will be repurchased, and Tencent shares that will be sold on a daily basis. It also intends to repurchase Naspers shares and Prosus shares within regulatory limits, specifically the EU Market Abuse Regulation, and intends to do so in a balanced way over time.

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