Shares of Chinese classifieds site 58.com are surging.
The ‘Craigslist of China’ has agreed to a merger with Ganji.com, another China-based classifieds site, according to the FT’s Henny Sender, citing people familiar with the deal.
Shares of 58.com, which trades under the ticker WUBA, rose 28% to as high as $US65.48 per share in trading Tuesday, an all-time high for the company, which went public in late 2013.
China’s technology sector is booming, raising concerns about a bubble in the sector.
Here’s the FT:
“The latest merger comes at a time when investors are very bullish about Chinese internet shares but are also concerned that many of the sector’s companies are burning too much cash as they subsidies their operations to attract customers.”
Last week, we highlighted a report that the price to earnings ratio of internet stocks listed in China was 220 times earnings, passing the Nasdaq earnings multiple of 156 at the height of the tech bubble.
And with these massive valuations, western investors in mainland Chinese internet companies are now beginning to demand more shareholder value, Sender wrote.
Here’s a chart showing the climb in trading Tuesday:
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