The listing of Prosus on the Euronext Amsterdam on Wednesday is arguably the most significant technology listing this year. Certainly it is the biggest by far, with only Uber in the valuation ballpark; it’s also the only tech stock to be listed in Europe this year, which is expected to arouse considerable interest from European investors.

And the Naspers subsidiary will be the third-largest company on the Euronext, after Shell and Unilever and the second-largest technology firm in Europe, after German software maker, SAP.

It is worth remembering though that while it dominates in Europe it pales when compared to the likes of Facebook with a market capitalisation of $531-billion, Amazon – $900.5-billion and Alphabet (Google) – $841-billion.

Biggest tech listings in 2019

Source: Business Maverick research and Computerworld.com

On listing the share performed ahead of expectations, opening at €76.00, 30% higher than the reference price issued by Naspers on Tuesday night. The share closed at €74.43.

As far as the secondary listing on the JSE goes, Prosus started trading at R1 238.50 on Wednesday morning, before settling at R1 200 and closing at R1202.65.

The new company offers investors, both old and new, a good platform for possibilities and opportunities in the e-commerce and fin-tech space. Its dominance on the Euronext will attract interest from investors who may not have liked the Naspers structure or its listing on the JSE.

This could drive share price growth and result in new spin-offs and investments.

That said, whether the listing achieves its other purpose, to reduce the discount between the Naspers share price and the company’s net asset value remains to be seen.

“We are thrilled that Prosus has been so well received, but a little disappointed in the way that Naspers has traded today – it really should not trade at such a big discount to its holding in Prosus,” says Paul Theron, a partner with Vestact.

“It is possible that offshore investors in Naspers, who have no tax considerations to worry about, have been switching from the one to the other today. We should give this a few days. Most investors will only have their allocations in their accounts on Monday.”

“The value unlock has been muted,” adds Jean Pierre Verster, CEO of Protea Capital Management. “Roughly 1.5% of value has been created via the unbundling and listing of Prosus.”

He unpacks this calculation thus:

Naspers price before unbundling announcement: R3332

Naspers closing price on Tuesday 10^th September: R3515

Naspers price on Wednesday 11^th September: R2425

Prosus average price on Wednesday 11^th: R1200

Dividend paid by Naspers on the same day: R0007

Total value created: R3632

The difference between Tuesday’s closing price and the combined price of Naspers, Prosus and the dividend on Wednesday is 3.2%. However Verster notes that Tencent was up 1.7% overnight on Tuesday, so one should exclude that gain, meaning that just 1.5% of value has been unlocked thus far.

Bear in mind that the Naspers discount has already re-rated by 5% since the unbundling announcement was made in March, so one could argue that 6.5% worth of value has accrued in the price. Put differently, the discount between the share price and the net asset value of Naspers has reduced from 42% to 36%  with the unbundling.

While disappointing this was not unexpected. The Naspers company structure remains complicated –  Naspers will hold Prosus, which will hold Tencent, which investors don’t really like and is likely to maintain the discount. “What it tells me is that Naspers management has more work to do,” says Verster.

Prosus is trading at a healthier 15% discount to its net asset value. “This is not bad for an investment holding company, but could improve further,” he says.

The most important lever that management has is visibility, says Theron. “Bob van Dijk must get out there and schoomze those Dutch and Eurozone institutional investors, and get them to buy into Prosus.”

Naspers management has succeeded in reducing the weighting of the company on the JSE. At one point it accounted for 25% of the value of the JSE’s SWIX indices, which is unhealthy. Shareholder Weighted Indices have the same constituents as an existing market capitalisation weighted Index. It is expected that Naspers will reduce to about 20% of the Swix.

“I’m excited about this,” says Fatima Vawda, founder and MD of 27four Investment Managers. “This is a much healthier situation for the JSE.”

More importantly, she says, the move is a reflection of a management team that has become more alive to investor sentiment. “Naspers management was under pressure to unbundle the rump of its assets in order to unlock value for shareholders.

“They unbundled Multichoice earlier this year, and now Prosus. What we are seeing is a more sensible bundling of assets.”

But she adds, there is more work to be done to reduce the discount and unlock value for shareholders. BM