Breakingviews - Naspers’ Vision Fund-lite carries less baggage

Satellite dishes connect township residents to South Africa's DSTV television network, owned by telecommunications giant Naspers, in Khayelitsha township, Cape Town, May 19, 2017. REUTERS/Mike Hutchings

LONDON (Reuters Breakingviews) - As the world investment spotlight illuminated Riyadh last month, bosses of limelight-shunning Naspers stayed at home to unveil plans to pour $315 million into South African tech startups. That’s small compared to SoftBank’s $93 billion Vision Fund, powered in part by Saudi petrodollars. But the emerging market internet giant’s quietly-quietly $8 billion tech war chest is still worth watching.

Africa’s largest listed firm, which started a century ago as a pro-Afrikaner newspaper, has been defined by one epoch-making deal – buying a third of Tencent for $36 million in 2001. At the Chinese internet giant’s valuation peak in January, the stake was worth over $180 billion, roughly 45 percent more than Naspers, which also owns newspapers, a pan-African pay-TV operation, and multiple online classifieds, food delivery and fintech businesses. As an early investor in Alibaba, SoftBank boss Masayoshi Son offers one of the few comparable examples of such an investment home run.

One way of narrowing the discount between the value of the stake and of Naspers is to sell off bits of Tencent to reinvest in startups. Since doing that this year to create an $8.2 billion fund, Naspers shares have struggled amid concerns the cash will be wasted. This is understandable. Collectively, its new e-commerce ventures such as Russia’s or Germany’s Delivery Hero lost $615 million last year. Investors could be forgiven for seeing echoes of Son’s faith in cash-gobbling ride-hailing firm Uber.

But set against Tencent, Naspers shares have outperformed, suggesting the firm is getting some credit. Since the fund was announced on June 22, Naspers’ 14 percent decline has wiped $12 billion off its market value. Over the same period, the value of its remaining Tencent holding has lost $39 billion, a 26 percent drop.

A focus on emerging markets means Naspers’ version of the Vision Fund is shielded from big losses by the relatively small amounts that can be invested – in Africa’s nascent tech sector, $300 million goes a long way. And not everything it touches will turn to dust. In May, Naspers sold an 11 percent stake in Indian e-commerce startup Flipkart for $2.2 billion, after investing $616 million.

The group’s Flipkart announcement was short on emotion and details, a possible reflection of Naspers’ taciturn Afrikaner roots. This should concern investors wanting clarity on what their money is doing. But that’s the same problem stakeholders in Son’s actual Vision Fund face – without the need for handwringing about where the cash came from.


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