What: Shares of Chinese social networking company Momo (NASDAQ:MOMO) surged on Tuesday after co-founder and CEO Yan Tang partnered with various investment firms to make a going-private offer at a 20% premium to Monday's closing price. At noon on Tuesday, the stock was up about 10.5%.
So what: Tang, along with investment firms Matrix Partners II Hong Kong Limited, Sequoia Capital China Investment Management, and Huatai Ruilian Fund Management, own about 47.8% of the company's outstanding shares in aggregate, and control 84.1% of the voting power. The group offered $18.90 per American depository share, and the board of directors is currently weighing the offer.
Now what: The buyout offer values Momo at over $3 billion, despite the company generating just $45 million of revenue in 2014. Revenue is growing extremely quickly, though, with guidance calling for a 267%-291% year-over-year revenue increase during the second quarter.
This going-private offer for Momo is the latest in a string of going-private offers for U.S.-traded Chinese companies. With the Chinese stock market booming, there's an incentive to take these companies private with the eventual goal of relisting in China at higher valuations.
Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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