Shares of Bitauto Holdings (BITA) are trading higher on Friday, and it's not just because the rest of the market is higher as well. Rather, the company reported results for the first quarter of 2020 and announced it has entered an agreement to go private.
As of 10:30 a.m. EDT, Bitauto stock was 9% higher. With today's gains, the stock now trades higher than where it started 2020. It was down over 30% earlier in the year.
Bitauto is a Chinese company in the auto sector that provides internet content and marketing services and enables online transactions. For obvious reasons, cars didn't sell well during the coronavirus outbreak in China. Bitauto's first-quarter revenue was down 36% year over year in local currency. Its advertising and subscriptions business held up relatively well. But transaction-service revenue plummeted 48% from the first quarter of last year.
This unexpected revenue plunge led to a massive net loss for Bitauto. In Q1, it lost $181 million according to generally accepted accounting principles (GAAP). The company's non-GAAP loss was $147 million. However, the company's cost of revenue actually improved during the quarter. This suggests the bulk of Q1's problems were due to the external coronavirus event, not a broken business model.
These mostly discouraging results aren't likely causing Bitauto stock to rise today. In a separate press release, the company announced a definitive agreement that will take the company private. With several parties involved, the transaction is complex. But the important takeaway for investors is Bitauto's days as a public company are numbered.
Bitauto's go-private deal is all-cash, entitling shareholders to a payment of $16 per share. Considering the stock now trades close to that level, it's probably in shareholders' best interest to sell the stock and invest that money elsewhere. The upside is now limited for Bitauto, but growth stock opportunities abound on Wall Street.