Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

E-Commerce China Dangdang Inc. Jumps on Going-Private Offer

By Timothy Green - Jul 9, 2015 at 12:03PM

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 chairwoman and CEO of Dangdang hope to take the U.S.-listed Chinese company private.

What: Shares of Chinese e-commerce company E-Commerce China Dangdang ( DANG ) surged on Thursday after the company's chairwoman and CEO submitted a non-binding going-private proposal at a 20% premium to Wednesday's close. The stock was up as much as 12% at market open, but by 11:45 a.m., it had settled down to a 3.7% gain.

So what: Going-private offers have been all the rage recently for U.S.-listed Chinese companies, as the previously soaring Chinese stock market offered an opportunity to relist in China at a potentially higher valuation. The recent rout of Chinese stocks, however, throws this strategy into question. Nonetheless, Dangdang is the latest company to receive such an offer.

Chairwoman Peggy Yu Yu and CEO Guoqing Li, who together hold 35.9% of all outstanding shares and 83.5% of the voting power, have offered $7.812 in cash per American depositary share, which each represents five common shares of Dangdang's stock. The board of directors will form a special committee of independent and disinterested directors in order to evaluate the proposal.

Now what: With the stock still well below the offer price, investors don't seem optimistic that the deal will go through. Up until the middle of June, the Chinese stock market was soaring, and these going-private deals made sense. But over the past month, the Shanghai Composite index has declined more than 30%, and it's unclear how much farther Chinese stocks will fall. The market clearly doesn't believe that this deal will actually happen.

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.

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

E-Commerce China Dangdang Inc. Stock Quote
E-Commerce China Dangdang Inc.
DANG

*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 service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.