The proposed share exchange Naspers and Prosus offered as a solution to the large valuation discount in the Naspers share price appears to have underwhelmed the market.
The share exchange offer addresses the size issue. The extent of the change is significant but not seen as enough, as Naspers will remain as the largest weighting with initial estimates at about 14% in the JSE. Irking the market even further is the half-a-billion dollars in fees for these transactions, which are yet to deliver a sustainable solution.
As to resolving the unvirtuous cycle of discounts, the quest to find the next big growth driver usually comes at a big cost. The heavy investment costs lead to businesses being loss-making in their early growth stages as they drive revenue.