BUYOUTS: Momo Goes Mum, Shanda Waves Bye-Bye

Bottom line: Momo may be reconsidering its de-listing plan as it approaches profitability and becomes comfortable in New York, while Shanda’s final de-listing testifies to the resourcefulness and tenacity of founder Chen Tianqiao.

Shanda NY listing nears end game

Two companies aiming to de-list from New York are in the headlines as the weekend approaches, led by word that Shanda Games (Nasdaq: GAME) is finally packing its bags and heading home after a long and difficult privatization process lasting nearly 2 years. At the other end of the spectrum is social networking app maker Momo (Nasdaq: MOMO), which was aiming to capture the record for shortest life as a US-listed company when it announced a privatization bid in June just 7 months after its Nasdaq IPO.

I’ve written quite a few times about Shanda Games’ imminent de-listing, only to see the buyout derail for different reasons. But this time it really does look final after shareholders approved a buyout deal that has now formally closed. (company announcement) Meantime, Momo has just announced quarterly results that show it is almost profitable.  But what’s perhaps equally interesting is the lack of any mention of its own previously announced buyout offer in the report, which could perhaps imply a change of direction.

Let’s start with Momo, sometimes called the Chinese equivalent of US app Tinder, which has reported that its net loss shrank to just $800,000 in the third quarter, down from $14.6 million a year earlier. (company announcement) In my view that’s the equivalent of break-even, meaning it’s quite possible Momo could post its first-ever profits in the fourth quarter if current trends continue.

The company also posted strong revenue growth, with the figure tripling to $37.5 million in the third quarter from a year earlier. While that revenue growth does look impressive, it’s worth noting the figure is still quite small, which is one of the reasons investors have ignored Momo and other similarly small Chinese Internet companies listed in New York.

Momo made its IPO late last year and saw its shares lose about a quarter of their value, before regaining some momentum in the spring and summer. Its shares dipped 3.3 percent in after-hours trade after its latest results came out, and now trade about 5 percent below their IPO price.

Reading Between the Lines

As I’ve said above, an interesting element in this latest report is what’s not included, namely any mention of the status of Momo’s buyout offer announced in June at a bid price of $18.90. (previous post) That figure is now more than 30 percent higher than Momo’s latest price, and is almost certain to come down if Momo moves ahead with the plan.

But Momo’s failure to even mention the plan in its report could hint that it’s having a change of heart, and perhaps is growing more comfortable with its New York listing. If that’s the case it might ultimately scrap its privatization plan. Such a move makes sense for a number of reasons, many of which I’ve noted before (previous post), though I would still put Momo’s chances of pursuing its privatization bid at around 50-50.

Meantime, we’ll close with a quick look at what may be the final announcement from Shanda Games, which has just notified investors of the closing of a deal to sell itself to a Chinese buyer. Shanda Games said it will now request that its shares be de-listed, and that it will no longer make any disclosures usually required of a publicly traded company.

I’ve written about this deal quite a bit, and anyone who wants to see my latest thoughts can read a posting from last month on the same topic. (previous post) This particular deal has certainly taken a long time, and its completion testifies to the tenacity and resourcefulness of Shanda founder Chen Tianqiao, who was determined to dismantle his empire to pursue a career in private equity finance. Other companies aiming to privatize may not have the same resources and determination, and I still do think many of the nearly 3 dozen deals announced earlier this year may ultimately collapse.

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