Why Sungy Mobile, Ltd. Shares Soared

Is Sungy Mobile's jump meaningful? Or just another movement?

Feb 12, 2014 at 6:52PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sungy Mobile, Ltd. (NASDAQ:GOMO) rose nearly 10% Wednesday after the company announced it has acquired GetJar, a privately held mobile advertising network based in California.

So what: Sungy made the purchase for $5.3 million in cash, and says it may also issue more than 1.44 million Class A common shares of Sungy stock to the seller of GetJar by early 2016 if certain performance targets are achieved. What's more, without providing specifics, Sungy plans to grant equity incentives to GetJar management and key personnel who will be employed by the company going forward.

Sungy CEO Yuqiang Deng weighed in: "Our acquisition of GetJar provides our platform with state-of-the-art mobile data analytics capabilities that will support our mobile advertising research and development initiatives, and accelerate our product development process."

Now what: Keep in mind this acquisition is bigger than Sungy's $5.3 million purchase price implies; at today's prices, the first potential round of new shares would be worth nearly $5.6 million. Bug given Sungy's current market cap, that'd still only dilute existing shareholders' stakes by around 1%, and GetJar could make up for it by providing Sungy a more effective way to monetize its popular Android-based offerings.

In the end, while I'd prefer to hold off on buying shares of this this app-maker until it provides more color with its first quarterly earnings report as a publicly traded company, it's hard to blame investors for driving up the price today.

Editor's Note: The initial version used incorrect figures. This version has been corrected.

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