Momo marks the 13th Chinese company this year to plan a privatization bid following a US listing, with companies now looking to list on the booming local markets in China.
A consortium led by the company’s co-founder and CEO Tang Yan with participation of MatrixPartners China and Sequoia Capital is proposing to purchase the company for $18.90 USD per American depositary share, a 20.5% premium to the closing price of the company’s ADSs on June 22. The company’s market cap is estimated to be around $3.5 billion USD.
The company’s board of directors will form a special committee to evaluate the deal. Momo’s share surged 11% after the announcement of this news.
Starting out as a location-based social networking app for strangers, Momo has transforming into an interest-based mobile social network. The app has accumulated 180.3 million registered accounts as of September 2014, claiming to be the third most popular social app in China after Tencent’s WeChat and Mobile QQ.
Despite its popularity in China, Momo’s path in gaining confidence from U.S. investors has not been smooth, as its product was designed and grown in China. Although Momo’s share price surged to more than $17 USD on the IPO day, it lingered around an issuing price of $13.50 USD apiece for a long time.
Qihoo 360’s recent privatization move may have influenced Momo’s confidence on the matter. Several smaller U.S.-listed Chinese companies including GMCE, iDreamSky and Jiayuan, went private right before Qihoo’s bidding.
As the fourth largest Chinese internet company, which runs businesses across sectors, Qihoo’s return may trigger further delisting waves. Now it’s expected Momo’s efforts will be focussed on a fast local relisting.