Why 58.com Inc (ADR) Stock Skyrocketed Today

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.

What:Shares of 58.com Inc (ADR) were up over 28% as of 1:45 p.m. Tuesday following reports the Chinese classified ad specialist has agreed to merge with competitor Ganji.com.

So what: According to the Financial Times, sources familiar with the situation say the two companies signed a memorandum of understanding one month ago, and are expected to announce the merger on Wednesday.

Now what:The Times also noted 58.com founder Jinbo Yao and Ganji.com founder Hauyong Yang will become co-CEOs of the combined company, which would be worth as much as $10 billion. The merger would also likely result in significant cost synergies, including reduced marketing spending as the two competitors join forces.

But the sources also say the consolidation is expected to take place in two stages due to antitrust concerns, so investors should keep in mind such mergers are hardly guaranteed. As a result, I think 58.com investors would be wise to take at least some of today's quick profits off the table.

The article Why 58.com Inc (ADR) Stock Skyrocketed Today originally appeared on Fool.com.

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.

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