Please ensure Javascript is enabled for purposes of website accessibility

Why 58.com Stock Was Up Today

By Jon Quast – Updated Jun 15, 2020 at 2:48PM

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

The Chinese classified-ad company has agreed to a buyout offer, subject to shareholder approval.

What happened

Shares of Chinese classified-ad company 58.com (WUBA) traded higher on Monday, after the company entered into a definitive agreement that will take it private. As of 2 p.m. EDT today, the stock was up 10%.

58.com previously reported it had received a buyout offer. But the terms of today's announcement are a little better for shareholders.

A businessman rides a spaceship expelling cash exhaust over a multi-colored bar chart.

Image source: Getty Images.

So what

Per the merger agreement, each Class A and Class B share will be entitled to a cash payment of $28. Before you panic, remember that the shares trading on the New York Stock Exchange are neither Class A or Class B. Rather, these are the American depository shares (ADS). Each ADS represents two Class A shares, making the cash payment worth $56 per ADS. 

That's slightly better than the offer 58.com got back in April, which was $55 per ADS. While it's a slight improvement, longer-term shareholders were surely hoping for something more. Even after today's gains, the stock trades below where it started 2020.

WUBA Chart

WUBA data by YCharts.

Now what

The deal is still subject to shareholder approval. Two of the biggest shareholders are 58.com's CEO and General Atlantic Singapore Fund. Together, they represent 44% of the voting shares. Both of these parties have indicated they are voting all shares in favor of the deal that will take the company private.

With its ADS now trading around $55 per share, there's little upside left for 58.com shareholders. And there's no reason to think the deal won't go through. That's why it may be best to go ahead and sell in order to put that invested capital to better use, perhaps by investing it in another growth stock.

Jon Quast 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

58.com Inc. Stock Quote
58.com Inc.
WUBA

*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
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

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.