DouYu $DOYU gained 16% a few days ago with the news that Tencent $0700.HK will take it private according to a Reuters article. It then lost 19% the following day since apparently, these were just rumors. Can DouYu go private?
I did not react to the news of privatization since it was nowhere to be seen in any of the official documents of the two companies. As Warren Buffett wrote in one of his Partnership letters, we should not reach to rumors for special situation stocks but only when there is an official statement. This is not the case for DOYU.
Tencent owns 37% of DouYu and taking it private is technically not be an issue for them. But the Chinese Government is unlikely to authorize this. Even if they are able to take DouYu private, it might not be the best for long-term investors since the stock is currently trading under cash value with a negative EV. Even if the premium on the deal is 20%, it is not enough for long-term investors.
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