US Law Firm Is Investigating Momo’s $1.9bn Buyout Offer
A US law firm is investigating the proposed offer to buyout Chinese app Momo, following suspicions around the fairness of the deal.
Questions about the proposed deal were raised after the CEO and co-founder of Momo, along with a number of affiliate investors, made a $1.9bn offer to buyout the dating app.
Yan and the investors want to acquire the outstanding shares for $18.90 in cash, which is a 20.5% premium over Monday’s closing price.
These investors include Sequoia Capital China, Matrix Partners China and Huatai Ruilian Fund.
And US law firm Levi & Korsinsky are now investigating whether Momo’s management are using their current position of power to purchase the remaining shares of China’s most popular dating app.
The consortium, who made the going private offer on Tuesday, currently owns 47.8% of Momo’s outstanding shares.
They also hold 84.1% of its voting power.
On their website, Levi & Korsinsky said: “Under the terms of the transaction, the consortium would purchase all outstanding shares of Momo stock it does not currently own for $18.90 per share.
“The investigation concerns whether the consortium is taking advantage of its position to purchase the Company at an unfair price.”
The consortium’s current offer constitutes a 20.5% premium on Momo’s closing price of $17.24 per share on June 22.
However the US law firm notes that on May 27th, the company’s stock closed at its highest rate of $19.11 per share.
A growing number of Chinese internet companies are becoming more interested in the prospect of removing themselves from the American market.
Henry Guo, an analyst at Summit Research Partners told the Washington Post that many companies “are not being fully appreciated by US investors.”
The analyst also said that: “Momo’s business model is really unique and it’s difficult for U.S. investors to understand it, so it makes sense for them to go back to China.”
Some companies also believe that they are able to get higher valuations in the Chinese stock market than they would in the US.
Momo recently announced they hit 78.1m MAUs, an 83% increase from the year before.
This was coupled with a 383% increase in revenue compared to the year before, hitting $26.3m in revenue.
