Alibaba-Backed Momo Inc (MOMO) Jumps 26% On Opening Day

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Alibaba Group Holding Ltd (NYSE:BABA)-backed Momo Inc (ADR) (NASDAQ:MOMO) made an impressive debut on Nasdaq on Thursday. Shares of the Chinese social media company surged 26.07% on its first day of trading to $17.02. Momo raised $216 million in the offering, and said it would use the proceeds on marketing and research (the company has yet to produce a profit) The IPO was priced at $13.50, at the midpoint of the expected range of $12.50-$14.50.

Alibaba owns 20% stake in Momo

Alibaba will buy $50 million worth of Momo shares in a private placement. Classified advertising company Inc will also purchase $10 million of class-A ordinary shares. After the IPO, the mobile messaging company is currently valued at $3 billion. Alibaba acquired a 20% stake in Momo in November 2012, valuing it at $100 million at the time. According to its IPO filing, Momo is planning an advertising partnership with Alibaba.

Momo said in its filing that its revenue for the nine months ending Sept.30 stood at $26.2 million, up from $817,000 in the same period last year. It generates income through membership fees, advertisements, paid emoticons and mobile games,  The company had 60.2 million active users as of September. It helps users find friends (and some say prostitutes). based on their locations, and exchange pictures, videos and messages.

Momo CEO faces allegations of misconduct

The IPO comes as Momo co-founder and CEO Tang Yan faces allegations of corruption and misconduct. NetEase, Inc (ADR) (NASDAQ:NTES), the former employer of Tang Yan, has accused him of violating the terms of employment. Yan worked at NetEase from 2003 to September 2011. NetEase said Tang started Momo in July 2011 without its authorization while he was still a NetEase employee.

NetEase has also accused him of directing funds to an advertising company started by his wife. Momo said in a regulatory filing that Tang believed the allegations were malicious, and he would “vigorously defend himself.” Alibaba said that the claims against Tang had no merit.  Momo has also been sued by Hangzhou Momo Wedding Service Co over its trademark.

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