Fabricio Bloisi’s latest letter to shareholders went down like a lead balloon with the market on Tuesday.
The Prosus CEO’s missive, in which he promised investors “a very strong” set of 2026 results, nonetheless prompted a 7% slide in the company’s share price at one point, wiping off more than R100bn from the company’s valuation. To put that in perspective, the loss was greater than Prosus’s entire investment in Brazilian food-delivery group iFood, points out Laurium Capital analyst Junaid Bray.
And it is iFood that has the market spooked. While Prosus says the division “is operating from a position of strength”, Bray says investors are increasingly anxious about intensifying competition from Chinese players in Latin America that are “forcing iFood to respond with higher promotions”.
In his letter to investors, Bloisi acknowledged the big numbers that competitors are spending – in the region of $1.5bn this year – but said: “We do not think this level of spend is sustainable. iFood knows how to invest smartly to defend and grow – we have done it many times before and we are doing it again now.”
Still, it means Prosus will have to cough up more to defend its turf.
‘Irrational spend’
“We will now accelerate our investment in iFood to take the offensive to stimulate demand and build out and expand successful products,” said Bloisi. “These products have traction and allow us to compete effectively. Once established they will outlast any irrational spend, improve overall profitability and preserve the good long-term economics that we have built in the Brazilian market.”
The catch is that the investment will shave off between $100m and $150m from iFood’s earnings in the 2027 financial year. For 2026, however, Bloisi said he was “proud” to share that Prosus had hit its revenue target of about $7.3bn, and earnings from its e-commerce businesses of about $1.1bn.
Anchor Capital fund manager Mike Gresty indicates that Prosus has only itself to blame for the share price slide. “I think the market has been worried about competition from Meituan in Latin America for a while and management has downplayed this. [The] change in guidance suggests management was too optimistic,” he tells Currency.
Prosus, in fact, has ploughed more money into food delivery than anything else in its portfolio, including last year’s €4.1bn purchase of Europe’s Just Eat Takeaway. It means food delivery is worth more than the rest of Prosus’s e-commerce assets – excluding its investment in Chinese mega-tech group Tencent – put together.
In his letter to investors, Bloisi described iFood as “not just a food delivery company”, but as a leader in “quick commerce with an ecosystem that drives value to its partners through delivery, financial services, mobility, ads, loyalty, meal vouchers and more”.
Yet Umthombo Wealth analyst Lauren Zunckel says of all the businesses making up Prosus’s portfolio, “we view food delivery as having the weakest economics, and lowest potential to generate strong returns to shareholders”.
Overdone
It’s not clear, says Zunckel, whether Prosus will be able to generate “adequate returns” on this capex in the future, which is what the market is worried about – especially as Prosus continues to use money generated by its Tencent investment to plough into its other e-commerce entities, many of which have only recently turned profitable. Still, she says the market reaction is probably overdone – though, as Gresty points out, it’s in keeping with recent market reaction to big tech firms’ guidance on increases in investment spend.
“Generally the market is favouring the beneficiaries of spend,” he says.
Umthombo Wealth would rather, says Zunckel, see Prosus spend more of its free cash flow on share buybacks, “which would likely be more accretive for shareholders given the wide discount the group is trading at to its underlying net asset value”.
As it stands, Prosus has committed to spend about $5bn a year on buybacks.
Prosus closed 5.3% weaker at R747.64, while parent company Naspers ended 4.5% off at R850.11.
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