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Tencent stock falls as Prosus/Naspers to sell shares to fund buybacks

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Tencent stock falls as Prosus/Naspers to sell shares to fund buybacks
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Technology investor Prosus NV will tap its huge stake in China’s Tencent to fund a stock buyback in itself and parent Naspers, the Dutch firm said on Monday, knocking shares in the Chinese tech giant.

The move is aimed at closing a gap between the market value of Prosus/Naspers and that of the 28.9% stake in Tencent they own, which is currently worth about $136 billion.

Prosus itself is currently worth less than that stake at some 109.8 billion euros ($116.2 billion).

“This will efficiently unlock immediate value for shareholders because we’re selling (Tencent) shares at full value and we’re buying back our stock at a considerable discount,” CFO Basil Sgourdos said.

Prosus shares, which are down 27% in the year to date, jumped 10% on the news to 58.36 euros in Amsterdam as of 0750 GMT.

Shares in Naspers in Johannesburg were up 13% while shares in Tencent were down 1.5% in Hong Kong.

“We will continue to do this as long as the discount is at elevated levels,” Prosus/Naspers CEO Bob van Dijk said of the buyback plan, underlining that the process will be gradual but there was no specific timeframe or size limit on the sales.

As a rough indication, the company pointed to a maximum sale of 3-5% of the daily trade volume in Tencent shares.

“It’s a big bazooka idea to address a market inefficiency but that also retains our exposure to (Tencent) one of the best companies on the globe,” Van Dijk said.

Van Dijk, the highest paid executive in the Netherlands with a pay package worth $15.8 million for the past year, did not receive one part of his bonus that had been dependent on reducing the valuation discrepancy.

The share sale plan came as a surprise as Prosus had agreed not to sell further Tencent shares after selling a 2% stake worth $15 billion in 2021.

Asked about it, Sgourdos said he did not think violating the lock-up pledge was a problem.

“It’s something we had to consider in arriving at this decision. (But) we think that this is the right thing for our shareholders. And, you know, we have Tencent support in this decision.”

Tencent said it supports the move and expects the impact of the share sale to be “limited”.

Separately, Prosus said it had sold a $3.67 billion stake in JD.com.

Prosus and Naspers shares have fallen sharply over the past year amid a tech sector sell-off and a Chinese government crackdown on tech companies.

“The sale does not have any impact on Tencent’s operations or fundamentals,” said Union Bancaire Privée senior analyst Vey-Sern Ling.

“It is unlikely that China’s regulatory environment, which is improving, is a major consideration.”

Sgourdos said the company remained committed to China.

“We still have a very strong belief in Tencent and the Chinese economy and its ability to grow,” he said.

Investors say the complicated cross-holding structure between Prosus and Naspers has also hurt their share price.

In addition to Tencent, Prosus houses all of Naspers’ overseas investments in online classifieds, food delivery, fintech and education software — though the impact of Tencent dwarfs the performance of the rest.

Both companies reported a fall in trading profit from non-Tencent businesses for the full year ending March 31, as they grew sales but increased losses.

“Results were better than we expected on revenue but lower on profitability,” said ING Bank analyst Marc Hesselink in a note.

The current discount of Prosus to the value of assets it owns is 54% and at Naspers 65%, according to company-provided figures.

Prosus is in talks to sell its stake in Russia’s Avito, which had been valued at $6 billion before the Ukraine war.

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Amazon’s air cargo head changes jobs, will now oversee workplace-safety unit

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Sarah Rhoads, who was responsible for Amazon burgeoning air cargo business, is shifting roles to oversee the e-retailer’s workplace health and safety division.

John Felton, Amazon’s head of worldwide operations, announced the move in a note to staffers on Thursday, according to a copy of the memo viewed by CNBC. Rhoads will also be in charge of Amazon’s global operations learning and development unit, which deals with things like career advancement and skills improvement in the company’s front-line workforce.

“Safety is paramount in every aspect of aerospace and other industries look to aviation for best practices in safety,” Felton wrote in the memo. “Sarah’s background as a decorated military pilot and her success leading Amazon Global Air positions her as the ideal leader to assume this critical role.”

Raoul Sreenivasan, who joined Amazon in 2016 and currently oversees planning, performance and cargo for Amazon Global Air, will take over most of Rhoads’ Amazon Air responsibilities, Felton said. Prior to joining Amazon, Sreenivasan worked at DHL and TNT Express, a European courier acquired by FedEx.

Rhoads, a former U.S. Navy F-18 pilot, has been one of the top executives in Amazon’s sprawling logistics business. She joined the e-commerce giant in 2011.

Over the past several years, Amazon has steadily moved more of its fulfillment and logistics operations in house, building a transportation network that the company says rivals UPS in size.

As part of an effort to handle and deliver more of its own packages, Amazon launched an air cargo business. Rhoads joined Amazon Air in its early days and has overseen much of the unit’s growth, including the opening of a $1.5 billion air hub in Kentucky.

Amazon has contracted more passenger airlines to fly packages in addition to other operators like Atlas Air and ATSG .Sun Country, a leisure-focused carrier, began flying converted Boeing 737 freighters for Amazon in 2020, after travel collapsed in the Covid pandemic. In October, Amazon announced that it reached an agreement with Hawaiian Airlines to fly leased Airbus A330 converted freighters, which would be the largest aircraft in Amazon’s fleet and its first Airbus jets. The planes will help replace older jets in the company’s fleet, Amazon said.

Air cargo rates have plunged from record highs hit during late 2021, when port snarls and a dearth of international flights pinched capacity and drove up prices. The rebound in air travel has added capacity to the market, while inflation has fueled shifts in consumer spending. FedEx last year said it would park some aircraft and reduce some of its flights as part of its plan to slash costs.

Amazon CEO Andy Jassy is in the midst of a broad overview of the company’s expenses as the company reckons with an economic downturn and slowing growth in its core retail business. Amazon rapidly scaled up its fulfillment and transportation network in recent years in response to a pandemic-driven surge in demand. It’s since closed, canceled or delayed several warehouses across the U.S.

The company has also faced growing pressure to address its workplace-safety record. Employees criticized Amazon’s coronavirus response, arguing it wasn’t doing enough to protect them on the job, and the company has faced widespread scrutiny over the injury rates in its warehouses.

In September, Amazon appointed Becky Gansert to oversee its workplace health and safety unit after Heather MacDougall resigned from the company, CNBC previously reported.

Amazon has disputed reports of unsafe working conditions. During MacDougall’s tenure, the company set ambitious goals to reduce injuries, including a plan to cut recordable incident rates, a federal government measurement covering injury and illness, by half by 2025.

Last year Amazon committed to become “Earth’s Best Employer,” adding it to its list of corporate values, even as labor unrest intensified. The executive tasked with overseeing that effort, Pam Greer, departed Amazon last April, according to Bloomberg.

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Elon Musk’s Twitter Teeters on the Edge After Another 1,200 Leave

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Elon Musk’s Twitter Teeters on the Edge After Another 1,200 Leave
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Mr. Musk sent emails on Friday asking to learn about Twitter’s underlying technology as key infrastructure teams have been decimated.

Elon Musk sent a flurry of emails to Twitter employees on Friday morning with a plea.

“Anyone who actually writes software, please report to the 10th floor at 2 p.m. today,” he wrote in a two-paragraph message, which was viewed by The New York Times. “Thanks, Elon.”

About 30 minutes later, Mr. Musk sent another email saying he wanted to learn about Twitter’s “tech stack,” a term used to describe a company’s software and related systems. Then in another email, he asked some people to fly to Twitter’s headquarters in San Francisco to meet in person.

Twitter is teetering on the edge as Mr. Musk remakes the company after buying it for $44 billion last month. The billionaire has pushed relentlessly to put his imprint on the social media service, slashing 50 percent of its workforce, firing dissenters, pursuing new subscription products, and delivering a harsh message that the company needs to shape up or it will face bankruptcy.

Now the question is whether Mr. Musk, 51, has gone too far. On Thursday, hundreds of Twitter employees resigned after Mr. Musk gave them a deadline to decide whether to leave or stay. So many workers chose to depart that Twitter users began questioning whether the site would survive, tweeting farewell messages to the service and turning hashtags like #TwitterMigration and #TwitterTakeover into trending topics.

Some internal estimates showed that at least 1,200 full-time employees resigned on Thursday, three people close to the company said. Twitter had 7,500 full-time employees at the end of October, which dropped to about 3,700 after mass layoffs this month.

The employee numbers are likely to remain fluid as the dust settles on the exits, with confusion abounding over who is keeping a tally of workers and running other workplace systems. Some employees who quit said they were separating themselves from the company by disconnecting from email and logging out of the internal messaging system Slack because human resources representatives were not available.

Mr. Musk and his representatives on Twitter did not respond to requests for comment.

Elon Musk pushed relentlessly to put his imprint on the social media service, slashing 50 percent of its work force.
Credit…Ryan Lash/Agence France-Presse, via Getty Images

But the billionaire tweeted on Friday what he said would be changed to Twitter’s content policy. Hateful tweets will no longer be promoted algorithmically in users’ feeds, he said, but they will not be taken down. He also reinstated several previously banned accounts, including those of the comedian Kathy Griffin and the author Jordan Peterson, and posted a poll asking users to vote on whether Twitter should reinstate former President Donald J. Trump’s account.

Perhaps the most crucial question now is how Twitter can keep running after the giant reduction in its workforce in such a short time. The effects of the cuts and resignations have played out across the company’s technology teams, people with knowledge of the matter said.

One team known as Twitter Command Center, a 20-person organization crucial to preventing outages and technology failures during high-traffic events, had multiple people from around the world resign, two former employees said. The “core services” team, which handles computing architecture, was cut to four people from more than 100. Other teams that deal with how media appears in tweets or how profiles show follower counts were down to zero people.

“Wednesday offered a clean exit and 80 percent of the remaining were gone,” Peter Clowes, a senior software engineer, tweeted on Thursday about the departures on his team. “3/75 engineers stayed.” He said on Twitter that he quit on Thursday.

Mr. Musk is also considering shuttering one of Twitter’s three main U.S. data centers, a location known as SMF1 in Sacramento, which is used to store information needed to run the social media site, four people with knowledge of the effort said. If the data center in Sacramento is taken offline, it will leave the company with data centers in Atlanta and Portland, Ore., with potentially less backup computing capacity in case something fails.

Twitter is still operating, but it may become harder for the company to fix serious issues when they come up, former employees said. One former Twitter engineer likened the service’s current state to Wile E. Coyote, the Looney Tunes cartoon character, as he runs off the edge of a cliff. Though he may still be running in midair for some time, once he looks down, he drops like a stone.

“The larger and more prominent a platform is, the more care and feeding is needed to keep it running and maintain the expectations of the users,” said Richard Forno, the assistant director of the Center for Cybersecurity at the University of Maryland, Baltimore County. “It’s a huge challenge.”

Mr. Musk sent a flurry of emails to Twitter employees on Friday morning with a plea: “Anyone who actually writes software, please report to the 10th floor at 2 p.m. today.”
Credit…Jason Henry for The New York Times

The employee reductions are coinciding with Twitter’s entering one of its busiest periods in terms of visitors to the site. The World Cup, which begins on Sunday, is expected to bring a deluge of traffic to Twitter, which is the world’s fourth most visited website, according to Similarweb, a digital intelligence platform that tracks web traffic. Twitter gets 6.9 billion visits each month, slightly more than Instagram’s 6.4 billion, though far fewer than Google, YouTube or Facebook, according to Similarweb estimates.

On Twitter late Thursday, Mr. Musk professed confidence that the service would be fine.

“The best people are staying, so I’m not super worried,” he tweeted.

Fortune reported earlier that 1,000 to 1,200 Twitter employees had resigned. The Information earlier reported on some of Twitter’s infrastructure issues. The Verge earlier reported on departures from the Twitter Command Center.

Keeping a site like Twitter online is typically a task for senior engineers, who must constantly guard against cyberattacks and monitor web traffic to ensure servers are not overloaded, Dr. Forno said. If too many veteran employees depart, leaving Twitter without the expertise or manpower to monitor or quickly fix issues, problems could start, he said.

Many tech issues can be fixed remotely, but some may require workers at Twitter’s data centers around the country, Dr. Forno added. If issues fall through the cracks, Twitter users are not likely to see the site disappear all at once, at least at first. But timelines could start refreshing more slowly, the site might struggle to load and users would find Twitter to be full of glitches.

“It’s like putting a car on the road, hitting the accelerator and then the driver jumps out,” he said. “How far is it going to go before it crashes?”

Inside Twitter on Friday, remaining employees said they were bewildered by Mr. Musk’s changing directives. The company had said on Thursday afternoon that it was closing “our office buildings” and disabling employee badge access until Monday. But in his emails on Friday, Mr. Musk appeared to want to talk to people in person at the company’s San Francisco offices.

Employees were also having difficulties figuring out who was still on staff, and what areas of infrastructure needed more support to keep things up and running.

One worker who wanted to resign said she had spent two days looking for her manager, whose identity she no longer knew because so many people had quit in the days beforehand. After finally finding her direct supervisor, she tendered her resignation. The next day, her supervisor also quit.

Others were spending hours trying to track down which teams they were on. Some said they were asked to oversee duties they had never handled before.

The changes were occurring in a near-total information vacuum internally, employees said. Twitter’s internal communications staff has been laid off or left, and workers said they were looking outward for information from media articles. Mr. Musk has increasingly downplayed the role of traditional media over the past few months, citing Twitter as one of the best platforms for the rise in “citizen journalism,” as he put it.

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