Bank of America has weighed in on Prosus, the Amsterdam-listed tech investor, saying its massive share buyback program is doing much of the heavy lifting to keep the company's stock from trading at an even steeper discount to the value of its publicly traded assets. The bank notes that Prosus has repurchased $49.1 billion of its own shares since June 2022, an open-ended program that has become a central pillar of the company's strategy.
Prosus is not your typical tech company. It is a holding company, majority-owned by Naspers, that invests in a portfolio of internet and technology businesses. Its most famous asset is a roughly 26% stake in Tencent, the Chinese gaming and social media giant, but it also owns food delivery businesses like iFood and Delivery Hero, as well as stakes in a range of other tech ventures. Because of this structure, investors often value Prosus not on its own earnings but on the gap between its share price and the market value of its underlying holdings—a metric known as the 'look-through' value or net asset value (NAV).
How the buyback helps
When a company trades below the value of its assets, buying back shares can be a powerful tool. By repurchasing stock at a discount to NAV, Prosus reduces the number of shares outstanding. Each remaining share then represents a slightly larger claim on the same pool of assets. Over time, this arithmetic can help narrow the discount—or at least stop it from widening—even if the underlying portfolio's market prices don't move.
Bank of America's analysis suggests that this is exactly what has been happening. The $49.1 billion in buybacks since mid-2022 has provided a steady floor under the stock, offsetting some of the pressure that might otherwise have pushed the discount to even wider levels. The bank's view is that without the buyback, Prosus's shares could have fallen further relative to the value of its holdings.
That matters because Prosus's discount has been a persistent source of frustration for investors. For years, the company has traded at a significant discount to its NAV, partly because of its complex structure, partly because of concerns about corporate governance, and partly because of the cyclical nature of its holdings. The buyback is one of the few levers management has to address that gap directly.
Investor concerns remain
Still, the buyback is not a cure-all. Bank of America notes that investors continue to question two areas: the food delivery business and capital allocation. Food delivery has been a tough sector, with high competition, thin margins, and a slowdown in growth after the pandemic boom. Prosus's stakes in companies like Delivery Hero and iFood have faced valuation pressures, and some investors worry about the long-term profitability of these businesses.
Capital allocation is another sticking point. While buybacks are generally welcomed, investors want to see that management is deploying capital wisely across the portfolio. There have been concerns about the pace of investment in new ventures and whether those bets will pay off. The buyback itself is a form of capital allocation, and some argue that the company could be doing more to close the discount, such as spinning off assets or simplifying its structure.
These concerns are not new, but they remain front and center. The buyback has helped stabilize the discount, but it hasn't eliminated it. As of the bank's report, Prosus still trades at a meaningful discount to its look-through value, and the question is whether that gap will narrow further or persist.
What it means for investors
For everyday investors, the key takeaway is that Prosus is a stock where the discount to asset value is a central part of the investment case. When a company trades below the value of its holdings, there is potential for the discount to close, which could boost returns. But that potential comes with risks: the discount can widen, the underlying assets can fall in value, and management decisions can disappoint.
The buyback program is a sign that management is trying to address the discount, but it is not a guarantee. Investors should watch how the buyback evolves, how the food delivery businesses perform, and whether the company makes any moves to simplify its structure. As with any holding company, the value of Prosus ultimately depends on the value of what it owns—and how efficiently it manages that portfolio.
In the broader market, buybacks have become a common tool for companies to support their share prices, especially when they believe their stock is undervalued. Other companies have also leaned on buybacks to boost per-share metrics, though the effectiveness varies. For Prosus, the buyback is doing heavy lifting, but it is not the whole story.
Investors will likely keep a close eye on the company's next moves. Whether the discount narrows further depends on a mix of factors: the performance of Tencent, the trajectory of food delivery, and the company's willingness to return more capital to shareholders. For now, the buyback is a stabilizing force, but it is not a magic bullet.
