Archive for the 'Europe' Category

Naspers gives Europe its biggest consumer tech listing

Naspers has pulled off a dramatic restructuring of its holdings to unlock value after the successful listing of Prosus on Euronext Amsterdam stock exchange and simultaneously on the Johannesburg Stock Exchange (JSE). Prosus Group is valued at EUR120 billion ($134bn) and is Europe’s biggest consumer Internet firm and the third in value on the Amsterdam bourse after Royal Dutch Shell and Unilever.

South Africa’s Naspers is Africa’s most valuable company and still owns some 73% of Prosus. It has spun off its global Internet investments into Prosus including the largest stake (31%) of China’s Tencent and the largest stake (28%) stake in Mail.Ru, a giant Russian internet company, reported to be worth $1.4bn.

According to an announcement in Amsterdam: “The Prosus Group’s businesses and investments serve more than 1.5 billion people in 89 markets, and are the market leaders in 77 of those markets. The Prosus Group’s consumer internet services span the core focus segments of classifieds, payments and fintech as well as food delivery, plus other online businesses including e-tail and travel. The Prosus Group aims to build leading companies that create value by empowering people and enriching communities.”

Other investments include Russia’s Digital Sky Technologies (which invests in Facebook, Groupon and Zygna), Indian e-commerce start-up Swiggy, Takeaway.com, Germany’s Delivery Hero, investment in Brazil and e-commerce in the Middle East through Souq.com as well as financial services firms PayU and Wibmo.

In May 2018 Naspers sold its 11% shareholding in India’s Flipkart for $1.6 billion after buying it for $616m (Walmart bought 77% of Flipkart for $16bn in its biggest acquisition as it sought to square up to Amazon and local competitors for domination of the growing Indian market.

Although Euronext Amsterdam bourse set a guide price of €58.70 per share, investor enthusiasm was high as the shares opened trading at €76 and reached a high of €77.40, up 32%, on the first day before closing the week at €73.90. News reports say the market valuation of Prosus is based mostly on the Tencent holding and does not count many of the other investments.

Unlocking value in Naspers

Naspers had made what has been described as “the best venture capital investment ever” when in 2001 it bought 46.5% of Chinese Internet tech company Tencent with an initial investment of $32 million, which had grown to $175bn in value by March 2018, according to Bloomberg. It has also made huge profits by selling some of its Tencent holdings but remained with 31.1%.

Naspers has been listed on the JSE since 1994, and its investors are predominantly South Africans including the Government Employees Pension Fund (GEPF), managed by the Public Investment Commissioners (PIC). Before the spinoff it made up 25% of the JSE’s total market capitalization, and investors had to scale back their holdings to avoid over-concentration, so that the total value of Naspers was less than that of its shares in Tencent, ignoring the other companies.

After the spinoff, Naspers share price fell nearly 30% and it became only 15% of the JSE market capitalization.

The Amsterdam listing opens the global holdings to a wider pool of investors and should permit reassessment of both the value of both Prosus shares- Naspers still owns some 73% of Prosus which has also – and allow for future capital raising. One of the biggest investors in Naspers is the South African Government Employees Pension Fund, managed by the Public Investment Commissioners.

$314m for African tech start-ups

Naspers is seeking to find similar media, e-commerce, consumer, fintech and other successes in Africa. It has appointed 48-year-old Phuthi Mahanyele-Dabengwa as CEO, its first black and first woman chief executive, according to Quartz. She was previously chief executive of Shanduka Group, an investment company founded by South Africa’s President, Cyril Ramaphosa. In October 2018 Naspers announced a $314m fund to invest into promising African tech start-ups.

History of Naspers

Naspers was set up in 1915 as De Nasionale Pers Beperkt (National Press Ltd) to promote Afrikaner nationalism and it continued to support the National Party over the decades until 1989, throughout apartheid.

The first newspaper was Die Burger in 1915 and magazine Die Huisgenoot in 1916 (both originally name De.. ). Naspers started publishing books in 1918. In 1985 it set up M-Net, the first pay-TV in southern Africa.

(Disclosure: the writer owns Naspers and Prosus shares)

JSE Clear gets approval from European regulator ESMA

In a step forward for derivatives, clearing and settlement in Africa, the European Securities and Markets Authority (ESMA) has recognized JSE Clear, the derivative central counterparty (CCP) owned by the Johannesburg Stock Exchange. Stephen Maijoor, Chairman of ESMA’s Board of Supervisors, says in a letter to the JSE: “JSE Clear is recognized as a third country CCP under Title III of Chapter 4 of EMIR.”

This means that the European Union’s regulator recognizes JSE Clear as “equivalent” to CCPs in the EU.

The JSE and the Financial Services Board (FSB) worked together closely to obtain EU recognition, says Leila Fourie, Executive Director of the JSE. JSE Clear’s process to securing ESMA recognition was undertaken in conjunction with the FSB, and successfully finished 2 pieces of work:
• Obtain decision from the EU recognizing that South Africa’s legal framework and supervisory practices are equivalent to those contemplated within the EU regulations
• Obtain EU acknowledgement of the appropriateness of our CCP design and risk management processes in terms of the functioning of the market it is meant to serve.

Fourie commented in a press release on 1 Feb: “This achievement is hugely important for the JSE, our regulator the FSB and participants in South Africa’s financial markets. Today’s announcement means that EU-based market participants that clear trades through JSE Clear will be permitted to continue clearing for investors trading on the JSE.”

JSE Clear is required to apply for recognition by ESMA (the European Securities and Markets Authority), as a result of the fact that the CCP has Clearing Members that are either branches or subsidiaries of European registered entities.

Fourie added: “ESMA recognition strengthens our global credibility and fulfils a key requirement for multinational clearing members operating in the local market. Participation from these multinationals helps to distribute the credit, liquidity, operational and legal risk on our market – instead of concentrating this risk in a smaller number of clearing members.”

Central counterparty - graphic from www.economist.com

Central counterparty – graphic from www.economist.com

SA rules are globally relevant
“It is vital for South Africa that its rules are globally relevant and consistent with financial centers such as the EU. This milestone demonstrates that our CCP is robust and meets global standards in promoting financial stability and reducing systemic risk. The recognition of equivalence is a significant indicator of the rigidity of SA’s market infrastructures, and will aid in attracting international flows to our emerging market.

“The JSE is grateful to the FSB for their contribution in obtaining this major milestone for JSE Clear and the South African markets.”

“Clearing” denotes all “post-trade” activities from the time a securities transaction is executed until it is settled. A CCP is an organization that helps to reduce risk and safeguard against losses that could be incurred by a default of a trading participant when trading on the JSE’s markets.

JSE Clear was among the first in the world to be granted QCCP IOSCO status, i.e. marking it out as a “qualifying” CCP in terms established by the Basel Committee on Banking Supervision in July 2012. CPSS-IOSCO is a global standard for risk management aimed at any organization enabling the clearing, settlement and recording of a transaction.

The decision from ESMA follows earlier equivalence determinations for CCPs in Australia, Singapore, Japan and Hong Kong.

The JSE is one of the top 20 exchanges in the world in terms of market capitalization and is a member of the World Federation of Exchanges (WFE) and Association of Futures Markets (AFM). The JSE offers a fully electronic, efficient, secure market with world class regulation, trading and clearing systems, settlement assurance and risk management.

How do stock exchanges stay relevant to their societies? SMEs and exchanges

“How do we become relevant to society again?” This is the challenge posed to world’s securities exchanges this morning by Ashish Chauhan, CEO of BSE India securities exchange. He told the World Exchanges Congress in London this morning (Tue) that stock exchanges that concentrate only on trading for the sake of trading are in a zero-sum game.
They should look to add value in areas where there will be gains. He sees the gains will be huge for proactive securities exchanges: “In next 20 years we will create more wealth than in last 10,000 years – will the exchange industry participate in that”.
Chauhan points out that India has 1 in 6 of world’s population but only 2% of its land mass, there are more people than Europe and USA combined and 50% of population are under 25 years old. The challenge is to create jobs and to provide the skills for employment. Exchanges should ask if that will be done by private equity and other channels, or will the exchanges be able to play a major part?
BSE India’s response is to set up BSE SME Platform. Its website “offers an entrepreneur and investor friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India, into a regulated and organized sector.”
Chauhan says that going forward technology will change the world and India with its young population skilled in technology will be driving that change. How does each exchange solve the problems of the society it is operating in?

Europe’s integrated capital solutions to big issues

Earlier Cees Vermaas, in his first engagement as CEO of CME Europe, spoke of his vision of Europe in 2030. A centralized market and Europe-wide clearing and settlement will allow relentless pursuit of efficiency and falling costs. London will remain the financial centre, but smart networks will allow other specialist centres to grow all over Europe. This will include more exchange centres to provide funding for SMEs and for infrastructure. Exchange-linked investment into all forms of energy and will support transitions into new and efficient forms of green energy. European bond markets are only 30% of USA volumes at present but in coming years that will change fast with less fragmented bankruptcy regulatory frameworks