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Why DouYu Stock Popped While Huya Stock Dropped Today

By Evan Niu, CFA – Updated Oct 12, 2020 at 1:19PM

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The two Chinese live-streaming companies are merging.

What happened

Shares of DouYu (DOYU -4.96%) popped Monday, trading 9.3% higher as of 1:10 p.m. EDT, while shares of Huya (HUYA -6.55%) had dropped by 12.5% after Huya announced  it would acquire rival DouYu. Chinese tech giant Tencent (TCEHY -4.71%), which owns stakes in both live-streaming companies, has been pushing for a combination.

So what

Huya is offering 0.73 American Depository Shares (ADS) for each DouYu ADS in an all-stock deal. Based on Friday's closing prices, the transaction values DouYu shares at approximately $18.83, or about a 35% premium to where they finished last week.

The boards of both Huya and DouYu have approved the deal, but DouYu shareholders representing at least two-thirds of voting power will still need to approve the merger. DouYu co-CEOs Shaojie Chen and Wenming Zhang, who have 54.6% combined voting power, have committed to voting in favor of the deal.

Woman livestreaming on a computer

Image source: Getty Images.

In a separate deal worth $500 million, Tencent has agreed to assign its interests in its Penguine e-sports live-streaming business to DouYu while deepening its ties with the company.

Now what

Huya and DouYu shareholders will each wind up with roughly 50% of the combined company, which will be led be Huya CEO Rongjie Dong and DouYu's Chen as co-CEOs.

Tencent has entered into a separate agreement to buy DouYu shares from Chen -- the company expects to wield approximately 67.5% of the combined company's total voting power. The merger is expected to close in the first half of 2021.

Evan Niu, CFA owns shares of Tencent Holdings. The Motley Fool owns shares of and recommends Tencent Holdings. The Motley Fool recommends HUYA Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

HUYA Inc. Stock Quote
$2.14 (-6.55%) $0.15
DouYu International Holdings Ltd Stock Quote
DouYu International Holdings Ltd
$1.15 (-4.96%) $0.06
Tencent Holdings Stock Quote
Tencent Holdings
$34.58 (-4.71%) $-1.71

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