So, you need to own Naspers
on 12 September (Ex-div date) to qualify for Prosus shares or additional Naspers shares.
For a lot of investors, the biggest consideration affecting their decision is the tax impact of each option.
Investors may elect to receive 0.369 Prosus shares for 1 Naspers share, which creates a tax event and you will be liable for CGT or elect to receive 1 Naspers share and only pay CGT when you sell your shares.
If you bought your NPN higher up or are on the lowest tax bracket it makes sense to take the Prosus shares. But if you bought your shares a while ago, or own it in a trust or are in the highest income tax bracket, taking Prosus could raise a CGT liability of around 5% of your total holding.
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Here’s why this unbundling is great for SA investors
Stock unbundlings have always been rewarding for investors, with some investment managers and hedge funds only focusing on these special situations.
Look at what happened with Multichoice. Typically, unbundled companies outperform the company that held them over the next 12 months. There could be a chance to accumulate a few extra shares in Prosus after listing day at a good price before it pushes higher.
But when you add that Naspers traded at a discount to it’s stake in Tencent, the listing of Prosus offshore should allow a hard re-rating of Prosus and Naspers (through it’s 75% retained ownership in Prosus).
The discount to net asset value should reduce significantly pushing Naspers and Prosus above R4,000 combined in the weeks ahead and R5,000 in the months ahead.
Prosus will be the third largest company listed on the Euronext Amsterdam
It will have a weighting in the Eurostoxx 50 index between 1.2% and 1.8%. This means foreign index trackers will have to accumulate shares in Prosus, narrowing the discount to its some of the parts value.
And locally, asset managers will also become buyers of Prosus as it will have a weighting of between 3% and 6% in the capped Swix index.
There are also a many a foreign investor who will receive local inward listed Prosus shares that would favour selling off both Naspers and Prosus in favour of having a cleaner entry into Tencent via the Euro listing.
Traders should be cautious to not gear themselves up too much as share prices could be volatile from 12 September until 16 September.
If you don’t hold Naspers in your portfolio, now is the last chance to get in before the discount narrows to a normal discount of around 10%.
Buy Naspers shares below R3,500.
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The week ahead:
• Local: GDP (03/09)
• Local Results Due: Bidvest, Brimston, Fortressa, Net1ueps, Seaharvst, Sunint, Workforce (02/09), Anchor, Cashbil, WBHO (03/09); Discovery, Libstar, Mommet, SA corp (04/09); Assore, DRDgold, Fairvest, Hyprop, Implats, Mas, Sanlam, Upartners (05/09); Alviva, Brainwrks, Firstrand, Kaydav, Mustek, Putprop, RMBH (06/09)
• LDT: ARH, BHP, CLH, EMI, GFI, GLN, MPT, RES, SHP, SBKP (03/09)
Other Economic data releases of interest…
• Monday: Caixin Manufacturing PMI (CNY); Manufacturing PMI (UK)
• Tuesday: Retail Sales, Cash Rate, RBA Rate Statement (AUS); ISM Manufacturing PMI (USA)
• Wednesday: GDP (AUS); Trade Balance, BOC Rate Statement, Overnight Rate (CAN); Inflation Report Hearings (UK)
• Thursday: ADP Non-Farm Employment Change, Crude Oil Inventories (USA); SNB Chairman Jordan Speaks (CHF); Trade Balance (AUS)
• Friday: Unemployment Rate (CAN); Non-Farm Employment Change, Unemployment Rate, Fed Chair Powell Speaks (USA)
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