VC-backed China dating-app gains 26% on US trading debut

The company sold 16 million American Depository Shares (ADS) at $13.50 apiece, representing the mid-point of the indicative range. The offering could swell to $248 million if underwriters fully exercise the overallotment option, according to a regulatory filing.

The IPO coincided with recent market volatility plus accusations of misconduct leveled at Tang Yan, Momo's founder and CEO, by his former employer, Chinese gaming company NetEase. He denies NetEase's accusations, which include claims of non-governmental corruption and developing Momo using NetEase's time and resources.

None of Momo's venture capital and private equity shareholders sold shares in the offering. Matrix Partners has been diluted from 19.9% to 17.7%, while Sequoia Capital and Yunfeng Capital have both seen their holdings fall from 5.6% to 5%.

Alibaba, which is already an investor in Momo, agreed to purchase $50 million in shares via the concurrent private placement, while classifieds website 58.com is putting in $10 million. As a result, Alibaba's holding will be diluted by a smaller margin, from 20.7% to 20.4%.

Momo, which is best known for its "flirting" function, launched in August 2011 and racked up 10 million users within 12 months. As of September 2014, it had 180.3 million users, of which 60.2 million are classified monthly active users. That same month, users of the app sent a daily average of 655.2 million one-to-one messages.

The app is downloaded free of charge, and Momo started generating revenues in July 2013 through the introduction of a membership subscription package, which offers additional functions and privileges. Later in 2013, mobile games, paid emoticons and mobile marketing services were launched, further monetizing the app.

Momo posted revenues of $13.9 million in the first half of 2014, up from $3.1 million in the final six months of 2013, with membership subscription fees accounting for 63% of the takings. The company has yet to turn a profit. Losses amounted to $3.8 million, $9.3 million and $8.3 million in 2012, 2013 and the first half of 2014, respectively.

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• Topics
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• Alibaba Group
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