Posted 19 August 2019 - 01:10 PM
Hi Nosh...have this from fin institution..hope helps...Default option: Prosus shares
· Prosus holds no SA assets, offshore assets only;
· 100 NPN = 100 Prosus;
· If Prosus comes on at R900’ish per share (our expectation), CGT liability for 100 Prosus will be R16,200 (this is R900 x 18% = R162 per share CGT payable);
· That will form part of 2020 assessment, and will be payable August/September 2020 assuming investors are provisional taxpayers;
· Once the CGT has been paid on the R900, your Prosus shares will have a base cost of R900 going forward;
· This option generates significant CGT immediately (the negative), however, there is no SA asset exposure, so no discount to the offshore assets (the positive).
Elective option: Additional NPN, no Prosus
· New Naspers will still hold most of Prosus, so will hold both local and offshore assets;
· 100 NPN = 36.986 new NPN (equates to somewhere around R900 per share after Naspers share price drop);
· Limited amount of new NPN shares available;
· Tax base for those new 36.986 NPN shares will be R0;
· But obviously NPN share price is going to decrease by around R900 post Prosus;
· This option postpones the CGT (no CGT now) until you sell the new Naspers shares (the positive) , however, there will still be SA asset exposure, so Naspers will still trade at a massive discount to the offshore assets (the negative);
· Even if you elect this option, you might still be forced to take the “default option” for portion of your entitlement depending on how many investors elect the new NPN option as there are a limited amount of new NPN shares available.
On pure fundamentals (ignoring the CGT impact), the better option will depend on how the discounts play out for NPN and Prosus post listing. As a matter of opinion, most analysts seem to prefer Prosus (the default option) if you can stomach the CGT. All the action will be in Prosus in terms of corporate activity, and there is the attraction of a fresh class of shareholders.
Furthermore, Naspers could well suffer from the double-discount malaise. Remember the discount build up in the Tegkor-TIB-Rembeheer-Rembrandt and the Capevin Holdings-Capevin Investments-Distell structures. There is no short-term possibility of discount-unlocking corporate activity in Naspers and the SA assets are small enough to be immaterial in the scale of thinking.
Finally, should you wish to take this as an opportunity to restructure and diversify your portfolio, especially in the case where your Naspers holding is a significant portion of your portfolio, we would recommend you consider transferring your portfolio or your Naspers shares into a unit trust fund by means of a Section 42 Transfer. This means that the fund will take ownership of your shares and you will receive the equivalent Rand amount worth of units in the fund. The Fund will be suitably diversified and future purchases and sales will be made by the fund manager.
If you wish to go this route, it is important to note that you will need to seek independent advice regarding the tax implications of transfer, and whether just your Naspers holding or the entire portfolio should be transferred. If the sole purpose of the transfer is to defer tax (and not for diversification or other sound commercial reason) then capital gains tax could still be applied.
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