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DouYu Stock Down 50%



๐Ÿ“‰ I've been buying DouYu $DOYU since December 2020. It gained 70% before crashing by 50%. DouYu is the worst performing stock in my portfolio and I'm down about 20% on average.


๐ŸŽฎ DouYu is known as the ๐™๐™ฌ๐™ž๐™ฉ๐™˜๐™ ๐™ค๐™› ๐˜พ๐™๐™ž๐™ฃ๐™–. The Chinese gaming market is the largest in the world and growing at about 35% per year. In the US and the rest of the world, one can livestream on YouTube $GOOG or Twitch $AMZN but these are banned in China. The market there is dominated by DouYu, Huya and Tencent and together they have 80% of market share.


DOYU increased their revenues by 10X in 4 years and from 2019, they are profitable.


๐Ÿค The main reason why I bought DOYU was because of the ๐™–๐™ง๐™—๐™ž๐™ฉ๐™ง๐™–๐™œ๐™š ๐™ค๐™ฅ๐™ฅ๐™ค๐™ง๐™ฉ๐™ช๐™ฃ๐™ž๐™ฉ๐™ฎ. DouYu is going to be acquired by Huya in an all-stock transaction. The spread on the arbitrage is currently 40%.


The spread is so big because the market thinks the Chinese authorities won't allow Huya and DouYu to merge because Tencent is a major shareholder in both companies and they eventually want to merge their own live streaming business to the new Huya. We know that there's an antitrust probe against Alibaba $BABA . That's why the market is a little scared.


๐Ÿ‡จ๐Ÿ‡ณAnother reason why the shares are going down is because of a ๐™จ๐™š๐™ก๐™ก๐™ค๐™›๐™› ๐™ž๐™ฃ ๐™ง๐™š๐™˜๐™š๐™ฃ๐™ฉ ๐™ฌ๐™š๐™š๐™ ๐™จ ๐™ค๐™ฃ ๐˜พ๐™๐™ž๐™ฃ๐™š๐™จ๐™š ๐™จ๐™ฉ๐™ค๐™˜๐™ ๐™จ $MCHI . Being a small cap emerging tech Chinese stock, it was hit by this selloff.


If the deal doesn't go through, then I believe that DouYu is an undervalued stock. Therefore, even if we can't make money by arbitrage, over the long-term, it would still be a good investment.


Watch the full video on YouTube:

https://www.youtube.com/watch?v=90IyrtyFDhM&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=4


Full analysis of DouYu:

https://ishfaaqpeerally.teachable.com/courses/662813/lectures/31465220



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