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Out Of Africa

Naspers Tencent spinoff

Image source: HappyAprilBoy - Shutterstock

What's going on?

Naspers, Africa’s most valuable public company, announced plans this week to cleave off and repackage parts of its business – including its 31% stake in Chinese tech giant Tencent.

What does this mean?

The new company will be listed later this year in both the Netherlands and South Africa. It’ll hold all of Naspers’ many internet business investments outside of the latter country – which include big slices of Germany’s Delivery Hero and Indian equivalent Swiggy. The main draw will be that stake in Tencent, however – it’s worth $133 billion. Naspers will own 75% of the new company, offering the remaining 25% up to investors.

Why should I care?

For markets: There’s such a thing as too big.

Naspers’ 2001 punt on Tencent is one of the most profitable venture capital investments of all time. Only problem is, Tencent’s rapid rise has made Naspers worth a quarter of the entire South African stock market – and for many big institutional investors, that’s a problem. Self-imposed rules forbid them from investing too much of a portfolio in a single company, and the choke on demand is partly to blame for Naspers being valued around 30% below what its investments are really worth, at just $98 billion. A leaner structure should allow investors to value Naspers’ South African holdings more appropriately – and a European-listed company will benefit from new backers (as well as lower taxes on any future Tencent stake sales).

Zooming out: Things are heating up for European tech.

Europe lacks giant consumer-facing tech companies. It doesn’t have an Alphabet or SoftBank, but the new Naspers spinoff – potentially worth (a still-undervalued) $100 billion – will change that. Meanwhile, European regulators voted on Tuesday to update the region’s copyright rules, partly to level the playing field between American tech giants distributing content and European content creators. Coming into effect in 2021, the far-reaching law will force the likes of Alphabet-owned YouTube to spend time and money ensuring they secure permission before hosting copyrighted material.

Originally posted as part of the Finimize daily email.

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