Market Discoverer

Investment Idea for US and Hong Kong Market

Uncategorized

Two Chinese ADRs may be the candidates for privatization

As the tension between US and China escalated, some of the Chinese company have started to react by changing their financing strategy in US. It starts with SINA Corporation (SINA)’s $41 Buyout Proposal and then follow by Sogou Inc. (SOGO)’s $9 privatization. Both cases have the following common characteristics:

  1. Market Capitalization below US$ 5Billion.
  2. Offering party owns more than 50% of the total voting power of the company.

Base on this criteria, the following Chinese ADRs may be the candidates for privatization.

HUYA Inc. (HUYA)

HUYA Inc. (HUYA) is a leading game live streaming platform in China with a large and active game live streaming community. HUYA Inc started its initial public offering which priced at US$12 per share in 2018. Currently, the market capitalization of HUYA Inc. is around US$ 5.2 billion.

After the IPO, Huya’s parent company YY Inc was holding 54.9 percent voting power in the company, while a subsidiary of Tencent was holding 39.5 percent. However, on April 3 2020, the subsidiary of Tencent exercised its option to acquire 16,523,819 Class B ordinary shares for an aggregate purchase price of US$262.6 million in cash. As a result, Tencent held 50.9% voting power of the company.

Update: On 10 August 2020, Tencent Holdings Limited proposed that HUYA Inc. (HUYA) and DouYu International Holdings Limited (DOYU) enter into a stock-for-stock merger.

Cheetah Mobile Inc. (CMCM)

Cheetah Mobile Inc. (CMCM) is a leading mobile Internet company in China. In 2014, it started the initial public offering which raised about $168 million for US$14 per share. Currently, the market capitalization of Cheetah Mobile Inc. is around US$334 million.

Cheetah Mobile Inc is a wholly-owned subsidiary of Kingsoft Corporation, a Cayman Islands company publicly listed on the Hong Kong Stock Exchange (Stock Code: 3888). According to the 2019 annual report, the top three voting power entities are Mr. Sheng Fu (Chairman of Cheetah Mobile Inc, 47%), Kingsoft Corporation Limited (Principal Shareholders, 26.4%) and Tencent Holdings Limited (Principal Shareholders, 22.2%). As Kingsoft Corporation have delegated approximately 39.9% voting power to Mr. Sheng Fu in 2017, their voting right combine together will account for 73.4% of the total voting power.

Investment Disclaimers

Join 80 other subscribers


%d bloggers like this: