58.com Inc (ADR) Stock Drops as Investors Wait for News About Rumored Merger

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: After a nearly 30% pop on Tuesday following reports of a potential merger, shares of Chinese online classified ad specialist58.com Inc (ADR) pulled back as much as 9.7% early Wednesday.

So what: According to the Financial Times yesterday, sources familiar with the situation said 58.com and competitor Ganji.com not only signed a memorandum of understanding one month ago, but also were expected to announce a merger on Wednesday. Today's drop, then, seems to be a reflection of the fact that a merger has not been confirmed.

Now what: Of course, the day isn't over yet. And keep in mind that as of this writing, shares of 58.com stand around 16% higher than they started the week. While nothing is guaranteed, this indicates the market is holding out hope that the deal -- which could result in significant cost and competitive synergies -- might still happen.

But I also feel the need to reiterate that such a merger would almost certainly be subject to antitrust concerns, so investors should expect speed bumps along the way if a merger is in the works. Again, that's why I wouldn't blame 58.com investors for taking at least some of their chips off the table given this week's impressive gains.

The article 58.com Inc (ADR) Stock Drops as Investors Wait for News About Rumored Merger originally appeared on Fool.com.

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Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.