Online dating is a huge business, and if you follow this sector, you know that Jiayuan.com International Ltd. ($DATE) has doubled in price in 2015. The company has accomplished this by leveraging growing membership and a suitor that wants to take them private, sending a non-binding proposal letter from Vast Profit Holdings that involves the acquisition of all of the outstanding ordinary shares of the company that are not already owned by Vast Profit. The board cautioned the company's shareholders and others considering trading in the company's stock that “no decisions have been made by the Special Committee with respect to the company's response to any proposal and there can be no assurance” that any definitive offer will be made.
These are tricky investments, since privatization would end common shareholder participation, creating a short term tax event. So if you didn’t buy this stock already, you have limited upside, explaining today’s pullback of 13% to $8. Today’s action might be a reflection of cold feet by the CEO, but it doesn’t mean it is not worth owning at some level. The company seems sure to make money in an explosive growth industry. I expect to see a deal come at $10, or see the share price trade well above $10 in 2015 or 2016. CEO Rose Gong would be much better off allowing the company to remain public and cashing out down the road – but her company is now 12 years old, and she may be getting pressure to cash out.
Jiayuan.com is the largest internet dating website in China. It was founded by CEO Rose Gong from her dorm room in Shanghai in 2003 and now has over 140 million users. This makes the site the largest internet dating website in China in terms of revenue, total users, and active monthly members.
Chinese Online Users are Looking for a Partner, not a Date
It is important to understand that the difference between US-based dating services like eHarmony, JDate and others when comparing Chinese online dating websites is that these new millennial users tend to focus on finding a husband or wife. The site is designed to help Chinese singles find marriage, while discouraging its members from pursuing short-term flings. Jiayuan is one of the most visited websites in China. In October 2010, Jiayuan started its wedding planning service Xique.com, which focuses on setting up the home with a variety of related services.
Online dating is a huge business, and social media has helped this business grow over the last decade, making millionaires out of shareholders and investors while creating many happy couples. For a monthly fee, the new mobile dating and texting society adopted by the millennial culture has created a cottage industry that replaces old methods of finding a date, a husband or a wife, providing more power to founder Rose Gong, who adjusted the US-based model and adapted it to the Chinese culture.
This helped to grow her user base, and today she has a difficult decision to make regarding taking her company private after utilizing the US public markets to raise capital. As Gong cashes out, make sure that you are not left standing at the altar of global capitalism as a common shareholder.
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