EUROPEANS ARE keen internet users, but you would not know it is looking at a list of the world’s biggest companies peddling stuff and services online. The continent’s failure to spawn an Amazon or Alibaba—the top 20 most valuable internet firms are American or Chinese—has long been a blemish on Europe’s collective self-esteem. That will soon change. On March 25th, Naspers, a South African media group, announced it would spin off a company made up of its investments in tech firms and list it in Amsterdam. Europe, at last, will have a tech giant of its own.
Sort of. The new firm will undoubtedly be big: analysts expect NewCo, as the outfit is being dubbed until branding consultants come up with an even less inspiring name, will boast a market value of around $100bn. But what would be Europe’s second-biggest technology firm (see chart) will have little to do with Europe or its consumers. Most of its value will be down to the purchase in 2001 by Naspers of one-third of Tencent, a Chinese group best known for its universal WeChat app, for $32m. The 31% stake it still owns is now worth $133bn.
Naspers, which started as an Afrikaans newspaper group a century ago, has since invested in a host of startups, mostly in emerging markets. The runaway success of Tencent has created an enviable headache: Naspers has become too big for the Johannesburg stock exchange, where it now makes up a quarter of the local index. Such scale requires foreign investors, not all keen on South Africa’s currency and political risk. Amsterdam, where Naspers already has staff, has similar listing requirements to Johannesburg.
Splitting the group and relocating part of it to Europe should help close the gap between the value of the stakes in businesses Naspers owns, such as Tencent, and its market capitalization, which is lower. By the company’s reckoning, the discount has widened from around 25% four years ago to over 40%. Some of this is inevitable: Naspers couldn’t sell its stake in Tencent without paying taxes, for example. But it doesn’t look very comfortable for executives when investors ascribe little value to anything other than its star equity holding. Others know the feeling. SoftBank, a Japanese conglomerate, owns just under a third of Alibaba but gets (in its view) insufficient recognition from investors for its other businesses, like Sprint, an American telecoms firm, or a holding in a $100bn venture-capital fund that has rained money onto fashionable startups. Yahoo, an internet pioneer, has been renamed Altaba, a portmanteau of “alternative Alibaba.” By the time Yahoo’s bosses sold its operations to Verizon in 2017, keeping mainly its Alibaba stake, investors treated the stock as a back door to the Chinese firm.
Naspers has no plans to go that far. It will retain 75% of NewCo when it lists it later this year, and has not given up trying to replicate its Tencent jackpot. For example, an investment in Flipkart, an Indian online retailer, made handsome returns when that firm was sold to Walmart last year. The next wager on Europe, anyone?