Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>A double dose of StubWorld this week...</p>
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<p>As expected, <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> <a href="https://www.prosus.com/news/accelerated-offering-of-tencent-shares-by-prosus-nv/" target="_blank" rel="noopener">launched</a> another <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> offer. It is the same 2.0% as previously, but at a price 50% higher. Prosus has also committed not to sell any further Tencent shares for at least the next three years. </p>
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<p>Preceding my comments on Naspers/Prosus/Tencent are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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A double dose of StubWorld this week...



As expected, Prosus (PRX NA) launched another Tencent Holdings (700 HK) offer. It is the same 2.0% as previously, but at a price 50% higher. Prosus has also committed not to sell any further Tencent shares for at least the next three years. 



Preceding my comments on Naspers/Prosus/Tencent are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: Naspers/Tencent - And Another Three Years

Travis Lundy

<p>Three years ago on 22 March 2018, after <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> reported full year earnings for the year to December 2017, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> launched a sale of shares in Tencent of about 2.0% of shares out, lowering their stake and raising cash which was supposed to be used to buy more e-commerce assets, with the lofty but separately-stated goal being to "balance the portfolio" over the coming years. </p>
<p>At the time, Naspers was trading at a 40% discount - a level with which Naspers management was clearly unhappy - and Tencent was roughly 91% of Naspers NAV. </p>
<p>At the time, apparently wary of signalling more pressure on Tencent shares from potential future sales, Naspers promised it would not sell any more Tencent shares for three years. </p>
<p>But that set up the likelihood of a sale after Tencent reported earnings in March 2021, this time by <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> which inherited the listed equity positions from Naspers in a dropdown spinoff 18 months ago.</p>
<p>Then that sale did not arrive. </p>
<p>There were, of course, ructions in the market that same week as Family Office Archegos Capital Management ran into a spot of difficulty and both it and its financiers had to sell (in a hurry) tens of billions of dollars of concentrated positions - many in the category of Chinese stocks listed outside of mainland China. It was clearly not the best time to sell a large block, so it appears Naspers/Prosus waited. </p>
<p>Today, Prosus <a href="https://www.prosus.com/news/accelerated-offering-of-tencent-shares-by-prosus-nv/" target="_blank" rel="noopener">announced</a> an accelerated offering of Tencent shares - again selling 2.0% of shares out, dropping their position from 30.9% to 28.9% of shares outstanding, at an indicated 5.5-8.7% discount to last close - a price range of HK$575-595/share. Again Prosus has locked themselves up for longer than normal.</p>
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<p>Prosus has committed not to sell any further Tencent shares for at least the next three years, in line with its long-term belief in the potential of the business. </p>
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<p>This leaves one with the question... what next?</p>

Three years ago on 22 March 2018, after Tencent Holdings (700 HK) reported full year earnings for the year to December 2017, Naspers (NPN SJ) launched a sale of shares in Tencent of about 2.0% of shares out, lowering their stake and raising cash which was supposed to be used to buy more e-commerce assets, with the lofty but separately-stated goal being to "balance the portfolio" over the coming years. 
At the time, Naspers was trading at a 40% discount - a level with which Naspers management was clearly unhappy - and Tencent was roughly 91% of Naspers NAV. 
At the time, apparently wary of signalling more pressure on Tencent shares from potential future sales, Naspers promised it would not sell any more Tencent shares for three years. 
But that set up the likelihood of a sale after Tencent reported earnings in March 2021, this time by Prosus (PRX NA) which inherited the listed equity positions from Naspers in a dropdown spinoff 18 months ago.
Then that sale did not arrive. 
There were, of course, ructions in the market that same week as Family Office Archegos Capital Management ran into a spot of difficulty and both it and its financiers had to sell (in a hurry) tens of billions of dollars of concentrated positions - many in the category of Chinese stocks listed outside of mainland China. It was clearly not the best time to sell a large block, so it appears Naspers/Prosus waited. 
Today, Prosus announced an accelerated offering of Tencent shares - again selling 2.0% of shares out, dropping their position from 30.9% to 28.9% of shares outstanding, at an indicated 5.5-8.7% discount to last close - a price range of HK$575-595/share. Again Prosus has locked themselves up for longer than normal.

Prosus has committed not to sell any further Tencent shares for at least the next three years, in line with its long-term belief in the potential of the business. 

This leaves one with the question... what next?

Be Careful What You Wish For REDUX - Prosus Selling US$15bn in Tencent

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

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<p><a href="https://www.smartkarma.com/entities/prosus-nv-75c7a0c4-16ff-4433-a40f-25ae5b24077d" target="_blank" data-smartkarma-citation="entities:28498:1" rel="noopener">Prosus NV (PROSY US)</a> aims to raise around US$14.5bn via selling a 2% stake in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> overnight in Hong Kong.</p>
<p>We spoke about the placement in <a href="https://www.smartkarma.com/insights/tencent-placement-another-reluctant-but-well-flagged-sell-down-lifting-the-us-14-5bn-overhang" target="_blank" rel="noopener">Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang.</a></p>
</div><div><p>We have been covering the lock-up expiry since Feb 2021 in:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and</a></li>
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-block-and-buyback-linked-holdco-trade-update" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update</a></li>
</ul></div><div><p>While the overall cash being raised should be positive for Prosus and Naspers, not all aspects of the deal will be viewed positively. </p></div>


Prosus NV (PROSY US) aims to raise around US$14.5bn via selling a 2% stake in Tencent Holdings (700 HK) overnight in Hong Kong.
We spoke about the placement in Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang.
We have been covering the lock-up expiry since Feb 2021 in:
Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and
Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update
While the overall cash being raised should be positive for Prosus and Naspers, not all aspects of the deal will be viewed positively. 

Tencent Placement and the Holdco Implications - Deal Almost Done, Now What?

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<p>This week in StubWorld ...</p>
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<p><a href="https://www.smartkarma.com/entities/pccw-ltd" target="_blank" data-smartkarma-citation="entities:873:1" rel="noopener">PCCW Ltd (8 HK)</a>'s NAV discount has widened to levels around last August's Partial Offer - yet the longer-term discount remains wider still.</p>
<p>And <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> releases its FY20 results after the close of market today. Will this be accompanied by a large placement by <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>?</p>
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<p>Preceding my comments on PCCW and Tencent are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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<p><span>Reports are now emerging PCCW is in the cross-hairs to be deleted from the MSCI in the May review.</span></p>
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<p>As always, more below the fold.</p>
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This week in StubWorld ...




PCCW Ltd (8 HK)'s NAV discount has widened to levels around last August's Partial Offer - yet the longer-term discount remains wider still.
And Tencent Holdings (700 HK) releases its FY20 results after the close of market today. Will this be accompanied by a large placement by Prosus (PRX NA)?




Preceding my comments on PCCW and Tencent are the weekly setup/unwind tables for Asia-Pacific Holdcos.



These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.




Reports are now emerging PCCW is in the cross-hairs to be deleted from the MSCI in the May review.


As always, more below the fold.


<div><p>On 22nd March 2018, after market close in Hong Kong one of the largest overnight placements was launched. On that day, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> reluctantly sold US$10bn worth of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> shares.  <span>I say reluctantly because Naspers provided a three year lock-up at the time of the deal. That lock-up will expire next week. </span></p></div><div><p>We have covered the previous placement in our earlier note, <a href="https://www.smartkarma.com/insights/tencent-placement-huge-deal-in-size-small-in-relative-terms-succumbing-to-the-holdco-discount" target="_blank" rel="noopener">Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount</a> and spoken about the implications of the lock-up expiry in our Feb 2021 note <a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade</a>.</p></div><div><p>In this note, I’ll talk about the updates since then.</p></div>

On 22nd March 2018, after market close in Hong Kong one of the largest overnight placements was launched. On that day, Naspers (NPN SJ) reluctantly sold US$10bn worth of Tencent Holdings (700 HK) shares.  I say reluctantly because Naspers provided a three year lock-up at the time of the deal. That lock-up will expire next week. We have covered the previous placement in our earlier note, Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount and spoken about the implications of the lock-up expiry in our Feb 2021 note Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade.In this note, I’ll talk about the updates since then.

Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update

China

Prosus N.V. provides internet based services. The Company focuses on investments in internet, digital media, e-commerce retailing, and consumer internet companies. Prosus serves customers worldwide.

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Prosus NV (PRX NA)

StubWorld: Naspers/Tencent - And Another Three Years

This is a range trade situation. Expect management to get involved when Prosus widens to a ~40% discount to Tencent and Naspers at a 30% discount...

David Blennerhassett

Be Careful What You Wish For REDUX - Prosus Selling US$15bn in Tencent

Prosus is selling US$15bn of Tencent, locking themselves up for 3 years. They should have sold more and locked themselves up for less. The market...

Travis Lundy

Tencent Placement and the Holdco Implications - Deal Almost Done, Now What?

Prosus NV aims to raise around US$14.5bn via selling a 2% stake in Tencent. While the overall raising should be positive for Prosus and Naspers,...

Sumeet Singh

StubWorld: PCCW, Naspers/Tencent

There exit few positives in PCCW's stub ops. I would look to reverse the stub - Short PCCW, Long HKT. I believe a more suitable discount to NAV is...

David Blennerhassett

Tencent Placement Lock-Up Expiry - Block and Buyback Linked Holdco Trade Update

On 22nd March 2018, in Hong Kong one of the largest overnight placements was launched. On that day, Naspers sold US$10bn worth of Tencent shares....

Sumeet Singh

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