Why 58.com Inc. Shares Skyrocketed Today

Is 58.com's rise meaningful? Or just another movement?

Apr 8, 2014 at 6:54PM

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) rose nearly 15% Tuesday after SEC filings revealed that Tiger Global Investments has increased its stake in the Chinese online classified-ad company.

So what: All told, Tiger Global increased its stake from just 300,000 shares to over 2.52 million. The new position represents 6.5% of all outstanding shares.

The timing of the news is notable, as the stock temporarily plunged two weeks ago, when 58.com first proposed a dilutive follow-on offering of as many as 8.0 million American depositary shares. The initial proposal also included a 30-day option for underwriters to purchase another 1.2 million shares. Later that week, however, the stock partially recovered its losses after 58.com reduced the offering and 30-day underwriter option to 6 million and 900,000 shares, respectively.

Now what: Thanks to its solid growth prospects in a burgeoning market, shares of 58.com have risen an impressive 80% during its first five months as a publicly traded company. Still, with the stock trading around 21 times last year's sales and 43 times next year's estimated earnings, 58.com should get a few more quarters under its belt before you make any long-term investment decisions.

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Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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