Mohnish Pabrai Sold Alibaba To Buy Prosus (Tencent) | PRX, PROSY, PROSF Differences

Mohnish Pabrai Sold Alibaba To Buy Prosus (Tencent)

What is the difference between PRX, PROSY, and PROSF? Keep reading on or watch my YouTube video!

Mohnish Pabrai explained in an interview why he sold Alibaba in order to buy Prosus/Tencent, which he called a better business than BABA. I also explain the differences I found between Prosus’ ticker symbols: PRX, PROSY, and PROSF.

Video Contents:
-Intro Alibaba vs. Tencent
-Tencent Selling, Prosus To Get Dividends
-Guy Spier & Mohnish Pabrai Bought Prosus
-Why Mohnish Pabrai Sold Alibaba To Buy Prosus
-Naspers’ Spinoff Prosus’ Portfolio
-PRX, PROSY, PROSF – What’s The Difference?
-Fees To Buy/Own Prosus
-How To Buy Prosus?
-Superinvestors Who Own Prosus
-Conclusion on Prosus

Throughout 2021, Charlie Munger and Mohnish Pabrai had been cheerleading Alibaba until Mohnish sold BABA in favor of buying Prosus to get an indirect stake in Tencent.

So it seems like a chasm is forming in the value investing world where shameless cloners are torn between following in the footsteps of Charlie and/or Mohnish.

Will Chinese big tech heavyweights Tencent and Alibaba duke it out to see which eventually ends up on top, just like Apple and Microsoft did to end up in the top two market cap positions?

Because Tencent is currently leading the way at only being down 37% compared to Alibaba being down 62% from their all time market cap highs.

Among the reasons that Tencent has been drawing attention, one is that they announced on 12/23/21 that they would divest a majority of their stake in, about $16.4 billion, and then distribute the proceeds as a dividend to their shareholders. With Prosus having a 31% stake in Tencent, that’s going to be a big dividend payout to Prosus!

It seems like there is a cloud overhanging the Chinese e-commerce space because this Tencent news can’t be good for, and maybe Tencent would rather invest in areas other than the embattled e-commerce space where Alibaba is also suffering in lately.

The Dutch Prosus is a spinoff from South African company Naspers, and IPO’d on 9/11/19. It seems like most (if not all) of the Tencent stake is with Prosus, though they did some kind of share swap that I’ve yet to fully understand.

As you probably know, Mohnish Pabrai and Guy Spier are investing disciples of Warren Buffett and Charlie Munger. So it’s no wonder that they may have shamelessly cloned Charlie in buying Alibaba in 2021. Recently we got confirmation that both Mohnish and Guy have bought Prosus after rumors had been swirling around. But did Guy keep all of his BABA stake as well?

The Everything Money channel had an interview with Mohnish in which he talked about why he sold Alibaba, and the main 2 reasons were: 1) tax loss harvesting, and 2) he decided Prosus and Tencent were better businesses than Alibaba, and Prosus was even better than Tencent.

Mohnish said in the interview: “We buy things only for one reason, we buy things to make money. We sell things for 100 reasons. In the case of Alibaba, one of the reasons I sold Alibaba was for tax loss harvesting. There were actually two reasons why we sold Alibaba. Probably more than two but two is enough to justify it. I had studied and learned about Tencent and Prosus after we had made the Alibaba investment. And after we made the Alibaba investment, the stock went down. And Prosus and Tencent also went down. We hadn’t invested in it yet. And it was really simple, if I sold Alibaba we got the tax loss harvest, and one of the problems with tax loss harvesting is you can buy back the same security after 30 days. And in the 30 days it can move, and it can move against you. You might have bought a stock at $250, and you might have sold it at $180 lets say. With the idea in 30 days I’ll buy it back, but if it goes to $220 in 30 days, it’s not such a … and it’s hard to control that.”

“What I did with the Tencent/Alibaba deal, was I sold Alibaba, I moved the proceeds to Prosus. Not Tencent because Prosus is even better than Tencent. And I never need to buy Alibaba back again. Because I thought the Tencent business was superior to the Alibaba business. So it was killing multiple birds with one stone. Where I’m moving from a business that’s good, to a business that’s even better. I get the tax loss harvest, and I would have been willing to buy Prosus at the higher price. I still got it at a lower price, so it’s all OK,” concluded Mohnish Pabrai.

And it looks like Mohnish doesn’t plan to buy Alibaba back, probably to the sadness of many value investors. It’s also something to investigate as to why neither Mohnish nor Guy wanted to buy Naspers, and maybe it’s because “Prosus’ stock is more highly valued than Naspers’ stock.” But it definitely warrants for more research to understand the investment case for Prosus and/or Tencent.

Once upon a time, Naspers had invested $34 million into Tencent when it was still a startup in 2001. Prosus as a holding company has a bunch of other venture capital investments in addition to its Tencent stake.

PRX is Prosus’ ticker symbol in the Euronext exchange in Amsterdam and Johannesburg Stock Exchange (I’ve also seen it as PRX.AS). But it seems like the main avenue if US investors want to buy Prosus might be through the “grey market,” or Other Over The Counter (OTC). With less regulatory filing requirements, there is a lot less financial information available to try to understand the American OTC listings of Prosus: PROSY and PROSF.

If Prosus’ market cap is currently $170B USD (and this number seemed to vary across different sources), then Prosus’ stake in Tencent is currently priced at about $179.4B based on Tencent’s market cap. So Prosus might be trading at about $9.4B below its Tencent stake at the moment, which is a 5.2% discount and all of its other technology investments are free.

I learned that PROSY is a Sponsored Netherlands ADR from the Bank of New York Mellon, and it’s a fractional share in the ratio of 5:1 where 5 PROSY shares equal 1 Prosus ordinary share.

I also noticed that the trading history for PROSF seems to start two weeks after PROSY and PRX in google’s stock charts, so maybe that’s suggesting that PROSY is the main or original OTC Prosus ticker.

There’s also some fees associated with owning the PROSY. If you want to buy the European-listed PRX, the fees might be about 4 times as much as the ADR, including the currency conversion fee. But I didn’t find any fees for PROSF, so I’m not sure if it is buyable and/or if it has fees to own it.

But it seems like PRX is the one that Mohnish and Guy likely own, as Mohnish appeared to not know whether Prosus was listed in the US. But it is as an OTC stock(s).

I share an example of searching for Prosus in Fidelity, but I only find PROSY and PROSF, not PRX.

PROSY at 600,000 daily share volume has way more trading volume than PROSF at 2,000 share volume, and there’s slightly more info on PROSY like dividend data.

Looking into the institutional ownership of Prosus, I came across 3 superinvestors in Dataroma that included: Sequoia Fund, FPA Crescent Fund, and Clipper Fund. And while FPA Crescent looks like it bought the PRX ticker symbol, it’s less clear for Sequoia and Clipper Funds. But unlike what Dataroma is showing, I think it’s more likely that they bought PRX rather than PROSF.

And looking at some Wall Street Journal data on PROSF and PROSY, more mutual funds and institutions seem to own PROSF rather than PROSY. But I don’t see the 3 superinvestor funds on these lists.

Overall, it seems like PROSY is more accessible for American investors than maybe PRX. Let me know if you happened to buy any of the Prosus ticker symbols, or if you bought Tencent and what your rationale was.

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