Joyy Stock Surges 12% on Going-private Rumor Valuing at Up to $8 Billion

Top managers consider Joyy undervalued and may offer $75-$100 per share in a privatization deal.
Aug. 26, 2021 14:21
Joyy Stock Surges 12% on Going-private Rumor Valuing at Up to $8 Billion

Joyy Inc. (Nasdaq: YY) surged 12% in early trading Thursday on news of a going-private deal that could be worth up to $8 billion.

The popular Chinese social media and entertainment company, which operated the YY livestreaming platform before its acquisition by Baidu Inc. (Nasdaq: BIDU) last year, is heading toward privatization by its top managers. As Reuters reported today, citing sources, Joyy's chairman David Xueling Li and Xiaomi (OTC: XIACY; HKEX: 1810) founder Jun Lei have teamed up to take the company private at $75 to $100 per share.

Even at the low end of the range, the offer would represent a 37% upside from yesterday's close. The rumor sent Joyy's shares to $63.20 per share early on Thursday from yesterday's close of $54.91.

Reportedly, Li and Lei consider Joyy undervalued in the U.S. markets. They owned 23.2% and 7.8% of Joyy, respectively, as of 2020.

Last week, Joyy reported $473.5 million in revenues for the second quarter, at a 40% increase from the same time last year. Net loss from continuing operations has more than tripled year-over-year to $109.3 million. Joyy said it had $4.9 billion in cash and cash equivalents, restricted cash and cash equivalents, short-term deposits, restricted short-term deposits and short-term investments as of June 30.

Joyy reported a decreased number of average MAUs in the second quarter, attributed to the impact of the Indian government's measures to block Chinese-owned apps in its local market, which included Bigo Live, Likee, and Hago. Overall, it counted 415.8 million MAUs, down 26% year-over-year.

The company also announced a quarterly dividend of 51 cents per American depositary share, to be paid on Sep. 29 to shareholders of record as of Sep. 8.

Last November, Joyy was hit by allegations from notable short-seller Muddy Waters. The research firm claimed Joyy counted bots and fake users. Joyy is "about 90% fraudulent," Muddy Waters wrote in its report. At the time, the company had denied the allegations, but the legal troubles for Chinese U.S.-listed stocks and the regulatory crackdown at home weighed on Joyy's shares. Year-to-date YY stock is down 23%.

If the deal goes through, Joyy would follow Sina Corp., Sogou Inc. (NYSE: SOGO), LAIX (NYSE: LAIX), Ruhnn Holding Ltd., China Biologic Products Holdings, Inc., in their delisting from the U.S. bourses – just to name a few. Last month, news surfaced that another major social media company, Weibo Corp. (Nasdaq: WB), is in talks for a going-private deal.

JOYY, YY, Baidu, WB