A TOM Bomb

Shares of TOM Online (NASDAQ:TOMO) were halted this morning, hot on the heels of a report that its parent company was set to take the company private.

If true, this would be the second incident since last week's plunge in Chinese stock prices that points to some deep implications of the emerging market's slide. Leading online advertising specialist Allyes had its heart set on going public later this year, but accepted a buyout offer from display ad giant Focus Media (NASDAQ:FMCN) last week.

Cynics may argue that China's move to raise margin account requirements couldn't possibly be the root of the TOM Online buyout. Still, it may have been the final shoot to break the panda's back.

TOM has struggled as a public company in recent months. The shares have surrendered more than half their value since being singled out in the Motley Fool Stock Advisor newsletter service last year. This provider of wireless services and online websites has hit some performance bumps, even though an alliance with eBay (NASDAQ:EBAY) provided a glimmer of hope that the companies would combine to create a Chinese marketplace.

Last week's Shanghai shuffle will make it hard for Chinese upstarts to go public in the near term, but that's still a sorry excuse for TOM to go it alone. Even with its stock price well off its all-time highs, it would be best served to plot its turnaround strategy out in the open as a public company.

At the very least, TOM owes it to its investors to consider potential buyout offers beyond its parent company's offer to go private. Companies like eBay or Yahoo! (NASDAQ:YHOO) have already made big investments in China. Don't dismiss Google (NASDAQ:GOOG) as a potential suitor, especially as its bread-and-butter search business has a fierce Chinese rival in market leader Baidu.com (NASDAQ:BIDU).

Just because the market may be out of favor doesn't mean that Chinese stocks lack strong fundamentals. Bargains are starting to pop up in this overheated market, and it would be a shame to see Chinese companies like Focus Media and TOM Group be the only ones feasting on the opportunities.

Baidu is a recent selection in the Rule Breakers growth stock newsletter service. TOM Online, Yahoo!, and eBay are Motley Fool Stock Advisor recommendations.

Longtime Fool contributor Rick Munarriz has been to mainland China just once, but he's longing to brush up on his Mandarin and make another go of it. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.