500.com Ltd. surged after the Chinese online sports lottery operator said it got a $124-million investment from Tsinghua Unigroup International Co. through the sale of new shares.
The American depositary receipts rose 7.3 percent to $25.50 on Tuesday in New York to trade near a six-month high reached last week. The ADRs sank to a record $9.23 in February as Chinese regulators suspended Internet-based sports lotteries in some provinces amid a crackdown on unauthorized operations.
500.com, which forecast last month that it will not have any revenue in the second quarter after voluntarily halting lottery sales since April, said it will sell a 15.2 percent stake to the group that is backed by state-owned Tsinghua University. The Shenzhen-based company reported an operating loss for the first three months of this year as revenue increased 10 percent.
“The participation of a state-owned company bodes well for 500.com’s future market position,” Jun Zhang, who oversees China research at Rosenblatt Securities Inc., said by phone from San Francisco Tuesday. “It should be helpful for 500.com to get the government’s new license after the crackdown.”
The company will sell 63.5 million new shares to Tsinghua Unigroup for $1.95 each, or $19.5 per ADR, in a deal that is expected to close by the end of this month, it said in a statement on Tuesday.
500.com Chief Executive Officer Zhengming Pan said the partnership will “bring Tsinghua University’s strong technical and research capabilities” to the company, according to the statement.
The company said May 19 it was working with the China Sports Lottery Administration Center to develop a system to manage online sales, reiterating a statement from April. The company’s previous approval from the finance ministry to sell lottery tickets on the Internet wasn’t revoked, it said.
Given its operational history of authorized sales and its cooperation with the government on the new system, “500.com likely will be among the first group of operators to get a new license once the government resumes the sales,” Nick Ning, a Shanghai-based analyst at 86Research Ltd. said by phone Tuesday.
E-House China Holdings Ltd., a real-estate agency, climbed 4.6 percent to $7.02 after receiving an offer from Chief Executive Officer Xin Zhou and board member Nanpeng Shen to take the company private at $7.38 per ADR, a 10 percent premium over Monday’s closing level.
The Bloomberg China-US index for the most-traded Chinese companies in the U.S. slid 0.9 percent to 134.88 in a second day of declines.
The iShares China Large-Cap ETF, the largest Chinese ETF in the U.S. tracking Hong Kong shares, sank 1.4 percent to a two-month low of $48.73, while the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF fell 1.9 percent to $53.70.