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Should Naspers shareholders take up Prosus shares?
Its decision time for Naspers shareholders. They are required to make a choice between taking up shares in Prosus, the new European-listed business that will hold Naspers’ non-SA investments, including its stake in Tencent, or taking up additional Naspers shares. Should you elect Prosus shares, which is the outcome if you take no action, you will likely trigger a capital gains tax liability. For example if you own 500 shares you will likely trigger a CGT liability of around R83 033. So what should you do? Henry Biddlecombe, Portfolio Manager at Anchor Capital South Africa joins CNBC Africa for more.
Fri, 05 Jul 2019 10:43:30 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The dilemma facing Naspers shareholders involves choosing between Prosus shares and additional Naspers shares, with tax implications playing a crucial role in the decision-making process.
- The default option of receiving Prosus shares triggers a capital gains tax liability, resulting in a potential 5% reduction in the value of the current Naspers position, especially impactful for those in the top tax bracket.
- Consulting tax advisors and carefully evaluating the long-term prospects and potential discounts of both Naspers and Prosus shares are recommended steps for shareholders navigating this complex choice.
Investors who hold shares in Naspers, the South African multinational conglomerate, are currently facing a critical decision regarding their stock holdings. The choice on the table is whether to take up shares in Prosus, the new European-listed business housing Naspers' non-South African investments, including its substantial stake in Tencent, or to opt for additional Naspers shares. The decision-making process is complicated by the tax implications associated with the default option of receiving Prosus shares if no alternate election is made. Henry Biddlecombe, Portfolio Manager at Anchor Capital, sheds light on the nuances of this choice. He explains that while there are pros and cons to both scenarios, the economic interest of investors in the group remains the same regardless of the decision taken. However, the key point of contention lies in the tax consequences of not actively choosing an alternative. Choosing Prosus shares by default triggers a capital gains tax liability, representing around a 5% drag on the value of the current Naspa position. This tax burden becomes particularly significant for shareholders in the top tax bracket of 45%. In response to the tax implications, Biddlecombe suggests that shareholders carefully assess the potential impact in consultation with their tax advisors before making a decision.
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