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58.com Inc (WUBA US)

Year: 2020

58.Com, Inc. is a Chinese company that operates as a local life service platform. The Company transfers products and services between purchasers and sellers. 58.Com offers housing rental, recruitment, second-hand product, travel, catering, entertainment, and group-buying information and services.  It listed on the NYSE in October 2013 raising US$215.05M. In an additional share offering sale in March 2014, it raised US$228M.

February 13, 2020, short-sellers, Grizzly Research issued a report on 58.com; "We believe that 58.com (WUBA) is a House of Cards with Little Economic Substance". In the report, it stated that :-

  • In it's view, WUBA did not pass the due diligence test.
  • Filings from China suggested that the company had been overstating revenues.
  • it's biggest acquisition had seen most its revenue vanish and over 50% of shareholder equity should have been impaired.
  • Best businesses were spun off at deflated prices to insiders,
  • Less successful business segments were kept in the company and dressed up so the financials appeared better.

In short: Grizzly Research's analysis leads it to believe that WUBA is a fraud vehicle that primarily exists to enrich insiders and to raise money from US investors on the back of fake financials.

February 26, 2020, in GMT Research's Accounting Insights newsletter, it commented on the Grizzly report.  In conclusion it noted :-  "While the movement of businesses off-balance sheet has distorted 58.com’s performance and may have disadvantaged minority shareholders, we cannot verify claims that revenue is overstated. Furthermore, arguments that goodwill should be impaired appear weak. 58.com’s share price has only fallen 7% since the report’s publication, and management has not bothered to issue a rebuttal. Although we find the report unconvincing, we are no fan of the company which we believe should be avoided until governance and transparency improves."

April 2, 2020 58.com anncouced it had received a non-binding proposal to acquire the company.

April 29, 2020, short-sellers, Grizzly Research issued a follow up report on 58.com; "Is 58.com Inc. (NYSE:WUBA) Go-Private Offer Credible?"  In the report Grizzly was suspicious of 58.com's go-private offer.  It's suspicions were based on the timing of the offer; markets were down, undisclosed relationships between 58.com's management and the supposed buyer Ocean Link and doubts whether the buyer had the financing to do the deal.  

Spetember 18,2020 The company announce the completion of the merger with Quantum Bloom Company Ltd , a wholly-owned subsidiary of Quantum Bloom Group Ltd.  The company's shares seased trading on the  NYSE.


Grizzly Research: We believe that 58.com is a House of Cards with Little Economic Substance, 13 Feb 2020
GMT Research:  Accounting Insights, 26 Feb 2020
Grizzly Research: Is 58.com Inc. (NYSE:WUBA) Go-Private Offer Credible?, 29 Apr 2020
Reuters: China's 58.com to go private in $8.7 billion deal, 15 Jun 2020 
58.com: Annual report YE- Dec.2019
58.com: Annual report YE- Dec.2018
58.com: Annual report YE- Dec.2017
58.com: Annual report YE- Dec.2016


 


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