What happened

Shares of Cheetah Mobile (CMCM 0.88%) have skyrocketed today, up by 45% as of 12:20 p.m. EDT, after the company announced a large special cash dividend. The Chinese tech specialist said it has sold off its stake in TikTok parent ByteDance.

So what

Cheetah Mobile's board of directors has approved a special cash dividend of $1.44 per American depositary share (ADS), or $0.14 per ordinary share. The former figure is what's relevant for U.S. investors. That payout represents a significant proportion of yesterday's closing price of $2.07, and the special dividend will be paid on July 9 to shareholders of record as of June 23.

Green stock chart going up

Image source: Getty Images.

The company has agreed to sell its remaining stake in ByteDance, which will result in a gain of $66 million and a cash inflow of $130 million. Cheetah Mobile finished 2019 with $338.2 million in cash. Cheetah Mobile was an early investor in Musical.ly, which merged with TikTok a couple years ago. In addition, the two companies had announced a partnership in 2017 that also gave Cheetah Mobile the ability to receive ByteDance shares.

Now what

ByteDance's valuation has soared due to the rising popularity of TikTok. Cheetah Mobile is cashing out in order to return capital to shareholders, with the board spending $32 million in 2019 on stock buybacks as part of a $100 million share repurchase authorization from late 2018. The company had previously distributed a special cash dividend of $0.50 per ADS last year.

The sale is expected to close by the end of June.