DouYu Stock Down 50%
๐ 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.
๐ฎ DouYu is known as the ๐๐ฌ๐๐ฉ๐๐ ๐ค๐ ๐พ๐๐๐ฃ๐. 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.
๐ค The main reason why I bought DOYU was because of the ๐๐ง๐๐๐ฉ๐ง๐๐๐ ๐ค๐ฅ๐ฅ๐ค๐ง๐ฉ๐ช๐ฃ๐๐ฉ๐ฎ. 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.
๐จ๐ณAnother reason why the shares are going down is because of a ๐จ๐๐ก๐ก๐ค๐๐ ๐๐ฃ ๐ง๐๐๐๐ฃ๐ฉ ๐ฌ๐๐๐ ๐จ ๐ค๐ฃ ๐พ๐๐๐ฃ๐๐จ๐ ๐จ๐ฉ๐ค๐๐ ๐จ $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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