Why Inc. Shares Skyrocketed 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 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 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 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 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, should get a few more quarters under its belt before you make any long-term investment decisions.

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Steve Symington

Technology and consumer goods specialist for the Fool. Steve looks for responsible businesses which positively shape our lives. Then, he invests accordingly. Enjoy his work? Connect with him on Twitter & Facebook so you don't miss a thing.

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9/1/2015 2:17 PM
WUBA $43.75 Down -1.71 -3.76% CAPS Rating: *