52
Business
The Economist
September 5th 2020
2
1
but not as fast as those of its holdings. Mar-
kets seem to be valuing the portfolio of
companies which Prosus has spent over
$12bn building at less than nothing.
That looks unduly harsh. The manage-
ment of what is now Prosus has made bets
which, though less spectacular than Ten-
cent, would not shame most venture capi-
talists. The classifieds business it built up,
olx
, has 300m monthly users in 22 mar-
kets. Pay
u
, a payments arm, has grown rap-
idly, notably in India. An Indian e-com-
merce investment, Flipkart, generated a
return of $1.6bn when it was sold to Wal-
mart in 2018. Prosus’s minority stakes in
Delivery Hero, a food-delivery service ac-
tive in 40 countries, and Mail.ru, a Russian
social-media firm, are worth much more
than what it paid.
But challenges abound. Many Prosus
bets have tricky economics, promising jam
tomorrow with fruit and sugar nowhere to
be seen today. Adjusted for its stakes, its
food operations lost $624m in the year to
March, on revenues of $751m. Of the busi-
nesses it runs, only the classifieds turn a
(small) operating profit. Some of its invest-
ments are in industries likely to be profit-
able only if mergers create winners that
could attract the gaze of trustbusters.
Continuing to grow fast will require
buying rivals with heady valuations. In the
past year Prosus has narrowly lost out on
Just Eat, an $8bn food-delivery business,
and eBay’s classified-ads business, which
fetched $9bn. “On the one hand, you do
want to be disciplined and not overspend
on acquisitions,” says Ken Rumph of Jeffer-
ies, an investment bank. “On the other, if
you keep on finishing second you don’t get
to execute your strategy.”
Of 2020’s vagaries, covid-19 should help
lure new customers online. But the ongo-
ing trade skirmishes between America and
China pose a risk for owners of Chinese as-
sets. Last month President Donald Trump
gave Americans 45 days to stop doing busi-
ness with WeChat, Tencent’s messaging
app (as well as with TikTok, a video app—
see subsequent article). Tencent shares
tumbled, dragging Prosus down with it.
Potential investors may also be put off
by Prosus’s corporate structure. Naspers
still owns 73% of the shares, and the two
firms are essentially run as one. Even if the
parent sold down its stake, its shares would
carry 1,000 times more voting power than
anyone else’s. Naspers itself has similar
super-voting shareholders, who are seen as
close to management. They call the shots.
Naspers’s dual voting structure was put
in place to protect editorial independence
and carried over to Prosus, though it owns
no media assets. Tech founders often use
dual shares to protect their legacy. But Pro-
sus is a subsidiary of a century-old firm.
Whatever the rationale, the effect is to
shield executives from being held to ac-
count. A strong board might rein them in.
But its chairman, the former Naspers chief
executive who pulled off the Tencent deal,
is no counterweight. When two-thirds of
ordinary shareholders in 2017 voted
against the pay deals of Mr van Dijk and
others, their gripes were mostly ignored.
Other firms have grappled with the
curse of success. Yahoo struck gold with
Alibaba, another Chinese tech titan—only
to be undone by it when activist share-
holders pushed the American search pio-
neer to spin off other operations in 2017,
leaving mainly the Alibaba stake, which
was sold off in 2019. SoftBank, a Japanese
group which also made a bundle off Ali-
baba, took a different route. Its boss, Son
Masayoshi, parlayed his windfall into a
complex empire of telecoms, property and
venture capital. Whether that has been a
wise use of Alibaba’s riches is an open
question; Mr Son has had some big blow-
ups. Investors have recently nudged him to
sell some assets to cut back debt.
Mr van Dijk need not worry about debt
or activist investors, who would no doubt
campaign to offload the Tencent stake. Yet
not cashing in has borne handsome re-
wards. By trimming the lucrative stake bit
by bit—it sold about 2% of the firm in 2018,
raising $10bn—Prosus can indulge its
bosses’ empire-building instincts while
giving shareholders access to Tencent’s
growth. Listing in Amsterdam was meant
to give global investors a chance to buy into
Mr van Dijk’s broader vision, boosting Pro-
sus’s value and crushing the conglomerate
discount. So far this has not happened. Un-
less shareholders have a real say in what
Prosus is for, it may never do.
7
T
he mood
among airline bosses can
seem uniformly bleak. For good reason:
air travel may not return to pre-pandemic
levels until 2024. Not a week goes by with-
out an airline sacking thousands of work-
ers. Against this gloom, Jozsef Varadi, who
runs Wizz Air, cuts an audacious figure.
While other airlines cancel and defer or-
ders for new planes and put expansion
plans on ice, he wants to increase his fleet
from 127 planes to 160 by 2022 and double
passenger numbers to 80m by 2025. He be-
lieves the Hungarian low-cost carrier,
founded 17 years ago and now Europe’s
third-biggest behind Ryanair and EasyJet,
will not only survive covid-19 but thrive.
Can the plan fly? “The odds are it will,”
says Keith McMullan of Aviation Strategy, a
consultancy. Wizz Air managed to report a
19% rise in revenues in the 12 months to
March, to €2.8bn ($3.1bn). Net profits dou-
bled year on year, to €281m. Despite un-
avoidable losses this year, it has sustained
less covid-19 damage than rivals.
Luck played a role. Wizz Air’s customers
are on average 32 years old—younger than
those of rivals and less fearful of the virus.
It caters to many central and eastern Euro-
peans working in the west, who are keen to
fly home frequently. Wizz Air’s smaller
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