Momo Inc: MOMO Soars 30%-Plus as Alibaba Joins Buyout Group

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Momo Inc (ADR) (MOMO), known as “China’s Tinder,” spiked more than 30% in trading Wednesday, almost completely wiping out the 24% year-to-date loss it was sitting on before the surge.

The sudden bullish surge in interest came after several “finance affiliates” of Alibaba Group Holding Ltd (BABA) joined a Momo-buyout group proposed by CEO Yan Tang this past June. The news was revealed in this regulatory filing, which states:

“If the Proposed Transaction is completed, the Company’s ADSs would become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Act and would be delisted from the NASDAQ Global Select Market.”

The Chinese market has enticed several companies to remove their shares from U.S. exchanges, and with the majority of the blood off the streets, China looks ripe for the picking again.

Tang’s buyout proposal came just six months after the initial public offering of Momo, which raised $216 million at the end of 2014. The buyout would pay out $18.90 for its ADS shares, valuing MOMO at over $3 billion.

MOMO stock languished after it appeared the buyout was no longer in the cards, and shares hit their lowest point this past February, trading hands well under $7 per share.

What does BABA have to gain from this?

Momo recently posted fourth-quarter earnings results signaling impressive growth: a 113% increase in revenue over 2014, nearly 70 million monthly active users and net profits increasing 200% over 2014. Sure enough, Momo is the sure leader in the Chinese social dating scene, a scene that just happens to be in one of the more densely populated areas of the world.

BABA recently helped another company come back from the dead — Groupon Inc (GRPN), whose local business could mesh nicely with Momo’s business of connecting users with common interests in the immediate area. Alibaba bought a 5.6% stake.

With Alibaba’s beaucoup bucks, it wouldn’t take much to fold Momo under the privacy of Jack Ma’s frothy wing. As Krane Fund Advisors’ Brendan Ahern told Bloomberg back in February:

“People definitely like its affiliation with Alibaba. You’ve got someone with very deep pockets on your board. It could be interesting where that relationship goes.”

Where that relationship ultimately goes is anyone’s guess, but Momo and Alibaba’s future looks bright indeed.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/momo-inc-momo-soars-30-plus-as-alibaba-joins-buyout-group/.

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