Going short on overpriced Momo

Saxo Capital Markets Australia

Multi-asset trading platform

After the news of Qihoo’s management buyout bid last week, investors have been “feverishly looking for other Chinese (listed) companies that are planning to privatise”, says Neil Flynn, Portfolio Manager at Alcuin Asset Management. This speculative momentum has pushed the shares of social networking and instant messaging app Momo. But Flynn explains that groundless speculation of such bids usually results in a retracement of price over the following weeks. Momo's stocks have also gone up because of the company's recent stronger than expected results. Although Flynn says when results were delivered, the company’s management added the caveat these numbers were aided by notably lower operating costs due to the seasonally slow first quarter, and these will recover during the rest of the year. Therefore, Flynn expects results (and the stock price) to decline. On the delisting issue, the portfolio manager argues “privatisation of the company offers no real benefit at this time” and unlike Qihoo, the market doesn’t undervalue Momo. These and other reasons add to Flynn’s decision of shorting Momo. To read more visit: (VIEW LINK)


Saxo Capital Markets Australia
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