Unrelated announcements this week revealing entrepreneurial billionaire Sir Li Ka-shing will retire from two of his Hong Kong-listed companies, CK Hutchison and CK Asset, and South Africa-based media and ecommerce giant Naspers’ sale of part of its stake in Hong Kong-listed group Tencent have focused attention on the island and the value creation by two of the biggest business success stories of our time.
Naspers raised HK$76.9bn ($9.8bn) selling – for the first time – Tencent stock at HK$405 per share. Naspers sold 190 million shares, equal to 2% of Tencent’s total issued share capital.
Naspers cut its holdings to 31.2% and promised not to sell more shares in the next three years. Its overall stake had been valued at $175bn on Thursday according to Bloomberg, making it one of the greatest venture capital investments ever.
Naspers’ stake was diluted to just over 35% in China-based Tencent’s 2004 flotation on the Hong Kong Stock Exchange. Underwritten by Goldman Sachs and oversubscribed 158 times, Tencent issued 420 million shares priced at HK$3.70 each in an IPO that raised HK$1.56bn (then worth $200m).
Since then Tencent, the operator of WeChat, a messaging service with a billion active users, has soared in value even if Naspers’s own entire market cap of $121bn is effectively a discount on its holding in Tencent, let alone its other investments, which stretch from Movile in Brazil to Flipkart in India and Udemy in the US as well as its main operating business in sub-Saharan Africa.
Naspers acquired a 46.5% of Tencent in 2001 from existing shareholders including IDG Capital, then a corporate venturing affiliate of US-based publisher International Data Group, for $32m.
Tencent founder Pony Ma and four others had originally raised $2.2m from IDG and PCCW, a Hong Kong-based investment firm backed by Li Ka-shing. Sir Li’s other venture investments, including Skype in 2005, Facebook in 2007, Spotify, Waze, Siri, DeepMind through Horizons Ventures, have generally seemed as perceptive.
Sir Li invests in Horizons’ deals through his Li Ka Shing Foundation, though the firm was set up in 2002 and run by Solina Chau Hoi Shuen and her business partner, Debbie Chang Pui Vee.
According to a Forbes Asia profile, the Li Ka Shing Foundation has in turn put its winnings to work in ways such as a $130m donation to the Haifa-based Technion Institute of Technology to foster knowledge transfer between China and Israel where, through Horizons, Li has become the most active foreign investor, as investors would have heard at this week’s GCV Israel conference.
As the best investors, such as Naspers, Tencent and Sir Li, have long realised, the best deals come from backing local management and helping them around the world but Hong Kong* has been home to some of the most successful deals.
* Disclosure: The next GCV Asia Congress on 20 September, sponsored by Tencent, will be held in Hong Kong.