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Why DouYu International Stock Fell 16.6% in December

By Rich Duprey - Jan 7, 2021 at 10:26AM

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The live-streaming gaming company came under regulatory scrutiny.

What happened

Shares of DouYu International Holdings ( DOYU -8.27% ) fell 16.6% in December, according to data provided by S&P Global Market Intelligence, as the Chinese live-streaming gaming company came under scrutiny by regulators.

So what

DouYu was on a yearlong tear in 2020 as rumors of a tie-up with rival game-streamer HUYA ( HUYA -7.55% ) swirled, and Chinese digital conglomerate Tencent Holdings ( TCEHY 1.33% ) offered to mediate a merger of the two.

Youth smiling at glowing smartphone

Image source: Getty Images.

Tencent is a majority owner of HUYA and has a significant stake in DouYu as well. A merger of the live-streamers would be a big win for Tencent as HUYA is China's most popular online gaming site and DouYu is second, with the two having a combined market share in China in excess of 80%. 

Yet tech's meteoric growth in the country has brought attention from state regulators investigating large swaths of tech stocks, including Alibaba and Tencent, and the merger of DouYu and HUYA.

Alibaba and Tencent were fined for past acquisitions, and the union of the gaming companies is now in limbo as China's State Administration for Market Regulation put the deal under close scrutiny for possible violations of the country's new anti-monopoly laws.

DOYU Chart

DOYU data by YCharts.

Now what

A crackdown on tech companies could see the merger with HUYA, which valued DouYu at around $6 billion, fall apart. Regulators have effectively squashed Alibaba's IPO of Ant Financial, and could constrain additional growth of DouYu.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

DouYu International Holdings Limited Stock Quote
DouYu International Holdings Limited
$2.55 (-8.27%) $0.23
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
$59.23 (1.33%) $0.78
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
$122.49 (-3.95%) $-5.04
HUYA Stock Quote
$7.96 (-7.55%) $0.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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