JSE consultation in relation to Prosus N.V. and Naspers Limited capping


Naspers Limited and Prosus N.V have made submissions to the JSE in response to the market consultation paper that was published by the JSE Limited on 5 November 2019, in which the JSE proposes to treat Naspers Limited and Prosus N.V. as one entity for capping purposes in the FTSE/JSE Capped Indices through a new rule in the FTSE/JSE Africa Index Series. In these submissions Naspers Limited and Prosus N.V urge the JSE to uphold the decision it made on the same topic in July 2019.

Prior to the admission to listing and trading Prosus on Euronext Amsterdam and its secondary listing, on the JSE, on 11 September 2019, Naspers held extensive consultations with the JSE over a period of 8 months to determine the most optimal manner in which the secondary, inward listing of Prosus on the JSE could be executed in the interests of all stakeholders and investors, with the objective of unlocking value for investors. The deliberations included the treatment of Prosus in the South African market for indexation purposes as well as the inclusion, timing and weighting of Prosus in the relevant FTSE/JSE Africa Index Series. During this time period, to ensure all views were taken into account, the JSE also solicited opinion from all market participants. Following this consultation period, the JSE correctly set out and communicated to the market the indexation treatment of Naspers and Prosus in July 2019. This communication was then duly acted upon by the market.
Today, there is no new material information that now warrants a review. Moreover, a review in such a short time period after the implementation of the indexation treatment announced on July 2019 is likely to create the perception that indexation and policy certainty is not guaranteed in South Africa. Such a perception could have a negative impact on how international investors view South Africa and the JSE as an investment destination and could materially negatively affect foreign direct investment in South Africa.

We believe that the request to the JSE to cap Naspers and Prosus as a single entity in the FTSE/JSE Capped Indices through the introduction of the Proposed Ground Rule is inappropriate, and suboptimal for the following reasons:

  • The correct decision has already been made, implemented and acted upon by investors.
  • The change in the current policy is likely to benefit a few to the potential detriment of many. All investors should be considered in managing the indices and decisions regarding them should be made in the best interest of all investors and market participants.
  • Naspers and Prosus are unique and separate companies with distinct characteristics from a public investor standpoint, and attract diverging investor bases. This is already evident from the first two months of trading since the listing of Prosus on September 11, 2019. Treating them as a single entity would be, by the JSE’s own admission, unprecedented and inconsistent with international best practice.
  • The proposed amendment to the rules, including the proposed capping methodology, is likely to increase the risk profiles of both Naspers and Prosus unnecessarily as investors would be compelled to adjust their weightings. This would likely result in material outflows that could negatively impact all Naspers’ and Prosus’ institutional and retail shareholders. In addition, retail shareholders will be less equipped to adjust their positions and could potentially suffer a greater impact should the rule be implemented. This could lead to significant foreign direct investment outflows and loss of tax revenues at a time when the reverse is needed.
  • Investors that already made their long-term investment decisions and positioned themselves based on the  initial decision and information communicated to them around the admission to listing and trading Prosus on Euronext Amsterdam and its secondary listing, on the JSE, could be materially and adversely impacted by the introduction of the proposed change in rules. Broader market instability could follow as a result of investors being required to prematurely reverse their investment decisions and unwind their investments.

For these reasons, Naspers Limited and Prosus N.V urge the JSE to uphold the decision that it correctly made on this same topic in July 2019.
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About Prosus      

Prosus is a global consumer internet group and one of the largest technology investors in the world. Operating and investing globally in markets with long-term growth potential, Prosus builds leading consumer internet companies that empower people and enrich communities.
The group is focused on building meaningful businesses in the online classifieds, payments and fintech, and food delivery sectors in markets including India, Russia and Brazil. Through its ventures team investments, in areas including edtech and health, Prosus actively seeks new opportunities to partner with exceptional entrepreneurs who are using technology to address big societal needs.
Every day, millions of people use the products and services of companies that Prosus has invested in, acquired or built, including Avito, Brainly, BYJU’S, Codecademy, eMAG, Honor, iFood, LazyPay, letgo, Meesho, Movile, OLX, PayU, Red Dot Payments, Remitly, SimilarWeb, SoloLearn, Swiggy, and Udemy.
Similarly, hundreds of millions of people have made the platforms of its associates a part of their daily lives: Tencent (www.tencent.com; SEHK:00700), Mail.ru (www.corp.mail.ru; LSE:MAIL), Ctrip.com International Limited (“Ctrip”) (NASDAQ:CTRP), and DeliveryHero (www.deliveryhero.com; Xetra:DHER).
Today, Prosus companies and associates help improve the lives of around a fifth of the world’s population.
Prosus has a primary listing on Euronext Amsterdam (AEX:PRX) and a secondary listing on the Johannesburg Stock Exchange (XJSE:PRX), and is majority owned by Naspers.
For more information, please visit www.prosus.com.