Joyy stuck with unwanted China business after $3.6 billion Baidu sale collapses
Portfolio Pulse from The Bamboo Works
Joyy Inc.'s (NASDAQ:YY) planned $3.6 billion sale of its China livestreaming business to Baidu (NASDAQ:BIDU) has fallen through after failing to receive regulatory approval from China's anti-trust regulator. The deal's collapse has led to a 17% drop in Joyy's stock over two trading days. Joyy had already stopped including the China business in its financials since early 2021, focusing on its Singapore-based Bigo livestreaming business. The company may now need to restate financials for the last three years and seek a new buyer for the China business, potentially at a lower price. Baidu exercised its option to terminate the deal due to unmet closing conditions. The news also affects other companies in the livestreaming sector, such as Kuaishou (1024.HK), Douyu (NASDAQ:DOYU), Huya (NYSE:HUYA), and Hello Inc. (NASDAQ:MOMO).
January 04, 2024 | 2:43 pm
News sentiment analysis
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NEGATIVE IMPACT
The collapse of Joyy's deal with Baidu may have indirect implications for Douyu, as it reflects the heightened regulatory scrutiny in China's livestreaming sector, which could affect Douyu's future merger and acquisition opportunities.
Douyu, being in the same sector as Joyy, could experience negative sentiment due to increased regulatory risks highlighted by the failed deal, potentially impacting its stock price and strategic options.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50
NEGATIVE IMPACT
Huya may encounter similar regulatory challenges as Joyy in any future mergers and acquisitions, given the regulatory environment that led to the collapse of Joyy's deal with Baidu.
Huya operates in the same sector as Joyy and could be affected by the same regulatory pressures that caused the Joyy-Baidu deal to fail, potentially impacting investor sentiment and its stock price.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50
NEGATIVE IMPACT
Hello Inc., with its significant revenue from livestreaming services, may face investor concern over regulatory risks in the sector, as evidenced by the failed Joyy-Baidu deal.
The regulatory issues that led to the collapse of the Joyy-Baidu deal could also affect Hello Inc.'s livestreaming business, potentially impacting its stock price as investors reassess the regulatory risk in the sector.
CONFIDENCE 70
IMPORTANCE 50
RELEVANCE 40
NEGATIVE IMPACT
Joyy Inc.'s failed deal with Baidu and the subsequent stock price drop indicate a challenging period ahead. The company may have to restate financials and find a new, likely less lucrative, deal for its China business.
The termination of the deal with Baidu is a significant negative event for Joyy, directly impacting its strategic plans and financial reporting. The stock price reaction reflects investor concerns, and the need to potentially restate financials or find a new buyer adds to the uncertainty.
CONFIDENCE 85
IMPORTANCE 90
RELEVANCE 100
NEUTRAL IMPACT
Baidu's termination of the $3.6 billion acquisition of Joyy's China livestreaming business may relieve it from a deal that faced regulatory hurdles, but it also indicates potential challenges in pursuing large acquisitions in China's tech sector.
While Baidu's decision to terminate the deal avoids the immediate complications of integrating a business under regulatory scrutiny, it also suggests a cautious approach to expansion through acquisitions in the current regulatory environment.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80