Momo Inc (陌陌) shares rose the most in five weeks after the Chinese mobile social networking platform said a group led by its CEO had offered to take the company private.
The firm’s American depositary receipts (ADRs) rose 9.9 percent to US$17.24 in New York, leading gains in a Bloomberg index of the most-traded Chinese stocks in the US. Cofounder and CEO Yan Tang (唐岩) and investors including Sequoia Capital China Investment Management LP (紅杉資本) offered to buy all of Momo’s outstanding ADRs for US$18.90 each in cash, a premium of about 20 percent to the closing price on Monday.
The US$3.3 billion company joins a record 23 other China-based firms with US listings that have received buyout offers this year, as growing valuations in China’s domestic stock markets lure firms trading overseas back home.
The companies that seek to leave US exchanges believe that “they are not being fully appreciated by US investors,” Summit Research Partners analyst Henry Guo (郭琪) said.
They expect to have “better dialogue and communication” with Chinese investors, Guo said by telephone on Tuesday. “Momo’s business model is really unique and it’s difficult for US investors to understand it, so it makes sense for them to go back to China.”
This year’s go-private deals, which have a total value of US$25 billion, are offering investors a 23 percent premium over the companies’ average trading prices prior to their announcements, the lowest since 2010, according to data compiled by Bloomberg.
Almost 60 percent of the bids were below the targeted firms’ initial public offerings (IPOs). Momo sold shares at US$13.50 each in an IPO on the NASDAQ in December last year.
San Francisco-based ABR Investment Strategy CEO Brad Gastwirth said it makes sense for fast-growing companies like Momo to entertain an offer to delist, because “when they are private, they can focus on long-term growth, freeing up the time and effort they would otherwise spend dealing with public investors.”
He expects more companies with a similar growth profile to receive buyout offers.
Meanwhile, Luo Haijian (駱海堅), the CEO of China’s 4399 Co, an online gaming company, was accused by the US Securities and Exchange Commission (SEC) of trading on illegal tips before the June 17 announcement that Qihoo 360 Technology Co (奇虎360) had received a takeover offer.
The SEC alleged that Luo, 33, a citizen of China, made more than US$1 million in the “remarkably timed purchase” of Qihoo call options shortly before news of the buyout offer was disclosed, according to a suit filed on Tuesday in the Manhattan federal court.
The SEC said it obtained an emergency court order on Tuesday freezing Luo’s profits in a US brokerage account and prohibiting him from destroying evidence while regulators conduct their investigation.
“The suspicious timing and size of Luo’s trades spurred us to move swiftly to freeze his proceeds and ensure that potentially illegal profits cannot be siphoned out of this account beyond a US court’s jurisdiction,” SEC New York office head Andrew Calamari said.
Luo on Monday instructed his brokerage firm to wire US$600,000 to a bank account in Singapore, according to the SEC.
Chinese Internet-security company Qihoo, whose businesses include operating Web games, received a takeover offer of US$77 in cash per ADR, valuing the company at about US$10 billion, from investors including Zhou Hongyi (周鴻禕), its chairman and CEO.
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