Momo Slides Nearly 6% After Offering $650 Million Convertible Notes
Momo said it planned to use the net proceeds of this offering to repay a bank loan and cover the outstanding balance for the Tantan acquisition.
Shares of Momo Inc. (Nasdaq: MOMO) dropped nearly 6 percent today after the company, a mobile social networking platform in China, reported that it planned to offer $650 million in convertible senior notes.
According to the announcement, the notes will mature on July 1, 2025, and will be convertible into Momo's American depositary shares (ADSs). The conversion rate has not been finalized. Initial purchasers will have a 30-day option to purchase up to an additional $100 million worth of notes.
The news sent the stock of Momo to $45.35 per share Tuesday from $48.17 per ADS yesterday.
Earlier this year, Momo announced the acquisition of Tantan Ltd., a Chinese mobile dating startup that raised $70 million in series D funding last June to expand overseas. The lead investor was the popular social network YY Inc. (Nasdaq: YY). For the acquisition, Momo took a short-term $300 million bank loan in May.
Momo said today that it planned to use the net proceeds of this offering to repay the bank loan and pay the outstanding consideration for the Tantan acquisition, as well as to invest in Tantan's business development initiatives. Also, the remaining net proceeds would be used to support various business development initiatives for the Momo platform, including the purchase of intellectual property for Momo's live video and mobile games services, the company said.
Beijing-based Momo, whose application uses the location of users to connect them with nearby friends and strangers, reported net income for the first quarter was $129.9 million, or 63 cents per ADS, compared with $81.2 million, or 40 cents per ADS, in the same period last year. Revenue soared 64 percent year-over-year to $435.1 million.