Please ensure Javascript is enabled for purposes of website accessibility

Why Phoenix New Media Stock Surged Monday

By Daniel Sparks – Updated Apr 25, 2019 at 3:51PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A massive cash infusion from the sale of this investment could give Phoenix's business a boost.

What happened

Shares of Chinese media company Phoenix New Media (FENG -1.68%) jumped on Monday, rising as much as 41.7%. As of 12:10 p.m. EST, the stock was up 26%.

The stock's gain follows an announcement Monday morning that the company has entered into an agreement for the sale of a portion of its stake in Particle -- a company that owns Yidian, a fast-growing personalized news app in China.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

Phoenix, also called iFeng, said it has entered into "a binding letter of intent" to sell its 32% of outstanding shares of Particle to an investor. After the transaction, Phoenix would own 5.6% of Particle's outstanding shares on "an as-if converted basis."

If the deal is completed, the shares would be sold for $448 million, valuing Particle at $1.4 billion.

"With the letter of intent now reached, we are proud to announce that an important milestone has been achieved," said Phoenix CEO Shuang Liu in a press release on Monday. "Yidian has attained tremendous user base and forged remarkably close relationships with leading Chinese handset manufacturers. We are confident that Yidian will generate a handsome return on our investments."

Check out the latest Phoenix New Media earnings call transcript.

Now what

Phoenix believes its remaining stake in Particle will allow it to take part in further upside in the fast-growing Yidian app. But Phoenix is also optimistic about the cash it will receive from the transaction.

"The significant cash infusion from the proposed transaction will help fuel our own growth engine and expand both our product line and content through strategic investment opportunities," the CEO said.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Phoenix New Media Limited Stock Quote
Phoenix New Media Limited
$4.69 (-1.68%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.