After the Bell: In the Prosus of big changes as Bob bows out of Naspers
Bob van Dijk might have been CEO for a decade, a long time for any CEO, but at 50 he is also pretty young and I don’t think you willingly leave a job at the top table of tech, especially when you are earning R200m-plus a year.
The CEO of Naspers/Prosus, Bob van Dijk, abruptly left the company on Monday; the company insists it was “by mutual agreement” and that Van Dijk’s decade-long term was “very successful”. Is this just good manners, assuming such a thing exists in the rough and tumble work of tech, or is there something more there to worry about?
This is more than just an issue of lurid speculation, because so much of the value of the JSE rides on this company. But the big problem is that it is very hard to tell with the tools we have available.
The most obvious first port of call would be to see what shareholders think and, to do that, you would look first and foremost at the share price. But, as followers of the company’s travails will know all too well, the share price is absolutely joined at the hip with the company’s 25% stake in its Chinese investment, Tencent. Naspers/Prosus is worth less than that stake and has been now for almost a decade. But what that means is that the Naspers/Prosus share price movement is a function of how Tencent blows in the wind rather than anything it does, including booting the CEO.
To make it even more complicated, there has been a grand simplification, if you can call it that, of the shareholding relationship between Prosus, Naspers and Tencent. The result was a hair-raising day last week when the Prosus share suddenly seemed to halve in value. However, this was because the number of shares Prosus held in Naspers was “simplified”, so the actual value of shares in the hands of Prosus shareholders remained more or less the same.
The Prosus/Naspers share price has gone down, but then the value of Tencent has declined a bit too. So, what do shareholders actually feel about the departure of Van Dijk? The short-term movement of share price alone does not tell us much. What about the longer-term movement?
I think you have to chalk this up as a major detraction. Van Dijk may have had all kinds of other skills, but the brutal fact is that he never managed to convince shareholders that there was value in Naspers outside its investment in Tencent. Overall, it’s hard to see any value in the share that wasn’t the result of Tencent’s grand rise, and latterly, its decline.
Management took the view — because it couldn’t possibly be their fault — that the company’s discount to its net asset value was a consequence of the size of Naspers relative to the SA market. That justified a split in the company with a big chunk emigrating to the Netherlands, which is, by sheer coincidence, Van Dijk’s homeland.
That move didn’t work, you may recall, because the scheme the collective executives came up with was just insane, with an odd cross-holding between Naspers and Prosus. Blame it on tax, and SA’s corporate politics, or whatever. Anyway, the NAV discount improved a bit, but not so much that you would explicitly call it a success. So a new plan was hatched to simplify the structure because now that was the problem. And to do buybacks.
Whether the new simplified structure will reduce the discount remains to be seen, but in the short term, do we give Van Dijk credit for trying to reverse the lunacy he helped create? Well, you know, I suppose so. But then why leave just at the precise moment all this simplification comes into force?
And why leave, like, today? Naspers/Prosus chair Koos Bekker told investors this is really a matter of company culture and is also partly in deference to the CEO concerned. If a company announces the CEO is leaving a year down the line, then they are sort of in a holding pattern for that year with a “lame duck” at the helm. Better to cut the cord immediately.
Er … sure. But now the company has a different problem; it has an interim CEO in former chief investment officer Ervin Tu, whom I am willing to bet got a very surprising phone call over the weekend. Bekker says Tu has all the powers that Van Dijk had, but does he really? Tu seems like a shoo-in for CEO but still, the uncomfortable period Van Dijk has been spared has now been inherited by Tu while he waits to see if he actually nails down the top job and the new strategy yields the anticipated results.
Van Dijk might have been CEO for a decade, a long time for any CEO, but at 50 he is also pretty young and I don’t think you willingly leave a job at the top table of tech, especially when you are earning R200-million-plus a year. I’m sorry, maybe it’s just the journalist in me, but I’m plugging for a massive Succession-style blowout with shouting and anger and hair-pulling and good clothes, and all the other stuff. I’m probably wrong, but you know, it makes for a better story.
Seriously, I do actually think Naspers/Prosus’ problem is different to the problem they think they have. The company has ultimately done mostly the right things over the past few years: lots of work has been done setting explicit promises, engaging with shareholders and executing big, big share buybacks. It’s all kinda helped — but it also hasn’t.
Instead of thinking that the board and management are right if only shareholders would make the effort to see the light, it might help to proceed from the assumption that shareholders are who they are — the owners of the company — and try to fit the company into what shareholders think would make a good investment.
Biting that bitter pill would entail giving up on the idea of squeezing blood out of the Tencent turnip by selling it down bit by bit to have lots of lovely boodle to invest in brand new tech toys — a scheme which Tencent shareholders are understandably not crazy about, by the way. The key to a better understanding of the company is not more explanation or a different structure, but doing the thing empire builders hate doing: splitting it up.
Naspers/Prosus is such a different company because management has found some fabulous investments in the past, and in fact, Tencent is only one of them. Honestly, you have to give them enormous credit for that. But history is not destiny, and where we stand today is that shareholders are not quite sure if this is an investment company or an operating company.
Shareholders are not going to not notice that the new acting CEO is formerly from mega tech investment house SoftBank. Is it an exciting tech venture or a haphazard amalgamation of dozens of smallish bets all over the world that no human could possibly understand, let alone manage?
All in all, I have an odd feeling that over time an even bigger reorganisation could, and possibly should, be on the cards. DM