Phoenix New Media Ltd ADR (NYSE: FENG) is flying early on in the pre-market this morning, and for good reason. The company announced a letter of intent to sell a valuable asset. Of course, the news excited investors who are sending the stock on a run for the top. Today, we’ll talk about:
- The letter of intent;
- what we’re seeing from FENG stock as a result; and
- what we’ll be watching for ahead.
FENG Announces Letter Of Intent
As mentioned above, Phoenix New Media is climbing in the pre-market this mroning after announcing its entrance into a letter of intent. The letter was signed with a proposed investor and surrounds the sale of 32% of the total outstanding shares of Particle Inc.
In the release, FENG said that Particle is the owner of Yidian Zixun, a rapidly growing personalized news and lifestyle information application in China. The applications allows users to define and explore individualized content over mobile devices.
At the moment, the company owns 37.63% of the total outstanding shares of Particle. If the transaction comes to a close, this ownership will be reduced to 5.63%, after selling the other 32% of outstanding shares to the investor associated with the LOI.
According to the terms of the LOI, the investor has agreed to pay $448 million in cash for the acquisition of sales. At this price, the deal sets a valuation of Particle in the amount of $1.4 billion.
In a statement, Mr. Shuang Liou, CEO at FENG, had the following to offer:
With the Letter of Intent now reached, we are proud to announce that an important milestone has been achieved. Yidian has attained tremendous user base and forged remarkably close relationship with leading Chinese handset manufacturers. We are confident that Yidian will generate a handsome return on our investments. We also expect that our remaining interests in Particle will allow us to share in any further growth of Yidian. The significant cash infusion from the proposed transaction will help fuel our own growth engine and expand both our product line and content through strategic investment opportunities.
What We’re Seeing From The Stock
As investors, one of the first lessons that we learn is that the news moves the market. When it comes to Phoenix New Media, the news proved to be overwhelmingly positive. After all, the sale will drive nearly a half billion dollars into the company, bulstering its balance sheet.
Considering this, it’s not surprising to see that excited investors are pushing the stock on a run for the top. As is just about always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:57), FENG is trading at $5.07 per share after a gain of $1.47 per share or 49.83% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on FENG. In particular, we’re interested in following this transaction. While the letter of intent is a good sign, this is not a definitive agreement and the transaction is subject to various closing conditions. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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