US law firm raises questions about Chinese dating app Momo’s US$1.9 bln buyout offer

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An American law firm suspects Momo's management may be abusing its power to authorise a cut-price deal. Photo: Simon Song

Published: 1:15pm, 24 Jun 2015Updated: 1:49pm, 24 Jun 2015

A US$1.9 billion buyout offer for China's mobile social networking platform Momo, famous in China for its eponymous online dating app, is being investigated by an American law firm over how fair the proposed deal is.

According to a statement by Levi & Korsinsky, the US firm is looking into whether the consortium that offered to take Momo private on Tuesday is “taking advantage of its position to purchase the company at an unfair price”, according to an information request issued to Momo’s shareholders.

Momo went public and listed on the Nasdaq in December 2014.

The consortium includes Momo CEO and co-founder Tang Yan, as well as investors such as Sequoia Capital China and Matrix Partners China. It holds nearly 48 per cent of outstanding shares, and 84 per cent of the voting power.

The law firm also said that Momo’s shares closed at a high of US$19.11 on May 27. But in the non-binding preliminary proposal, the consortium offered to purchase each American depositary receipt (ADR) for US$18.90.

The offer represents a 20.5 per cent premium on the company’s closing price of $17.24 on June 22.

Momo, which held its initial public offering in December, is the latest in a string of Chinese tech companies that have received buyout offers recently. If successful, the deal would be valued at US$1.9 billion.