Why 58.com Inc Shares Temporarily Jumped Today

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 58.com Inc (NYSE: WUBA  ) initially rose more than 10% in Friday's early trading, then settled to close up 3% after the Chinese online classified ad company priced its follow-on offering of American depositary shares.

So what: Though shares had risen nearly 70% since 58.com's IPO five months ago, the stock plunged more than 15% since 58.com first announced the dilutive offering on Monday. At the time, it proposed that both it and selling shareholders would each offer 4.0 million ADS, with each ADS representing two Class A ordinary shares. In addition, 58.com wanted to grant its underwriters a 30-day option to purchase another 1.2 million shares.

In today's release, however, 58.com stated it will only issue and sell 2.0 million new ADS, while selling shareholders will still offer 4.0 million. Shares were also priced at $38 apiece. In addition, 58.com granted its underwriters a 30-day option to purchase up to an additional 900,000 ADS. The company's gross proceeds -- which don't include those from selling shareholders -- will be roughly $76 million.

Now what: The lower net number of new shares was welcome news after Monday's announcement, which explains the early pop. What's more, it's hard to blame 58.com for wanting to take advantage of its impressive post-IPO run to raise new capital.

Even so, while 58.com has grown quickly, shares do look pricey trading around 10 and 40 times next year's estimated sales and earnings, respectively. As it stands, and given its big run so far, I don't mind letting the dust settle to look for a more attractive entry point during the next few quarters.

Three stocks poised to help you retire rich
In the meantime, there are plenty of other great long-term stocks in which you can put your money to work. It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2895368, ~/Articles/ArticleHandler.aspx, 10/31/2014 3:14:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement