What happened
Shares of Sogou (SOGO) climbed 12.5% in September, according to data from S&P Global Market Intelligence. The search company's stock got a boost from overall market momentum, but it appears that its parent company Sohu.com's offer to acquire video game developer Changyou.com was a bigger catalyst for the gains in the month.
Like Changyou, Sogou was spun off from Chinese online media company Sohu.com. The search engine spinoff's stock rose roughly 9% in the day of trading after Sohu revealed its offer to acquire and reintegrate Changyou in a $500 million deal.
Image source: Getty Images.
So what
Sohu's press release detailing its plans to reintegrate Changyou made no mention of plans for Sogou, but the market may have either reacted favorably to the deal improving Sohu's overall competitive outlook or interpreted it as a sign that Sogou could also be bought out and folded back into the parent company. Though Changyou has yet to accept Sohu's offer, the market appears to anticipate that the deal will go through. The game company's stock has continued to go up toward the $10-per-share buyout price stipulated in Sohu's proposal -- and Sogou's stock has seen corresponding movement.
Now what
Sogou stock has continued to go higher in October, and is up roughly 4% in the month's trading so far and outperforming the broader Chinese tech sector.
The company is expected to report third-quarter earnings results in November and is guiding for revenue between $304 million and $314 million, representing year-over-year growth at the midpoint of the target.
Shares are trading at about 30 times the company's earnings over the trailing-12-month period.
