Chinese social media firm Momo Inc (ADR) (NASDAQ:MOMO) initial public offering on Thursday was a smashing success, with shares moving up a solid 26% in the first day of trading. Momo shares jumped to $17.02 on December 11 after the Momo IPO priced at $13.50, the middle of the range. Of note, as well as the initial public offering, Momo plans a private share placement to Alibaba Group Holding Ltd (NYSE:BABA) of $50 million and $10 million to Chinese classified advertising website 58.com Inc.
Alibaba took a 20% stake in Momo valued at around $100 million back in late 2012, according to a report from Brean Capital. Momo has plans to develop an advertising partnership with Alibaba, according to its IPO filing. Other early investors in the Chinese social media firm include Matrix Partners China, Yunfeng Capital and Sequoia Capital.
Statement from Oppenheimer analyst on Momo IPO
“The IPO has been very well received,” Ella Ji, a New York-based analyst at Oppenheimer & Co., commented. “Alibaba as a pre-IPO investor and concurrent investor shows Alibaba’s confidence in mobile-based, social products.”
Ji noted that Alibaba Group Holding Ltd (NYSE:BABA) may also be able to help grow Momo’s scale, “With the right target and strategy, there is more for Momo to do,” she said. “It has this potential to develop to be a really location based, social app, not only for dating.”
Accusations against Momo co-founder
The successful IPO is just slightly tarnished by the fact that Momo Inc (ADR) (NASDAQ:MOMO)’s co-founder Tang Yan is being accused of breaking his employment contract by Chinese gaming firm NetEase Inc. where Tang worked for almost eight years until September 2011.
In a statement earlier this week, NetEase claimed that Tang established Momo without authorization in July 2011, while he was still an employee of the firm. The company also alleges that Tang directed funds to an advertising business owned by his wife.
According to the statement, “Yan used his position to obtain all sorts of information and technical know-how from NetEase, and stole NetEase’s commercial interests.”
The statement also claims that directing advertising business to his wife is conduct equivalent to “corruption of non-governmental personnel.”
Last but not least, NetEase alleges Tang was held by the Chinese police for 10 days in 2007 relating to “indent behavior.”