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 LightInTheBox Holding Co. Ltd. were up nearly 12% as of 12:30 p.m. Wednesday after it announced Zhejiang Aokang Shoes has acquired a strategic stake in the Chinese online retailer.
Continue Reading Below
So what:Specifically, Aokang agreed to acquire a total equity interest amounting to roughly 25.66% of LightInTheBox from certain shareholders at a price of $6.30 per American depositary share. For reference -- and keeping in mind this isn't an outright acquisition -- even after today's pop, each American depositary share of LightInTheBox currently trades for around $5.65.
Now what: In addition, Aokang and LightInTheBox have agreed to jointly develop their own global "Internet Plus" strategy -- in keeping with the Chinese government's nationwide initiative announced in March -- with the aim of "transforming traditional manufacturing, starting with the shoes and leather product industry, by leveraging mobile Internet technology to vertically integrate online and offline resources." As a result, Aokang and LightInTheBox hope to introduce high-quality Chinese brands to more consumers on a global scale.
That's fair enough; LightInTheBox has an established cross-border e-commerce platform on which the partnership can build, while Aokang stands to benefit through its stake and by broadening its geographic scope.
But it's also worth keeping in mind LightInTheBox is currently unprofitable and suffering from sluggish growth. During its most recent quarter, the company increased revenue just 7.4% year over year to $87.6 million, albeit in large part thanks to significant foreign exchange headwinds. That translated to a GAAP net loss of $21.6 million, or $0.45 per ADS. For now, while I admit this partnership could offer intriguing growth opportunities, I prefer watching LightInTheBox from the sidelines until it shows progress toward its end goals.
The article Why LightInTheBox Holding Co Ltd-ADR Stock Lit Up Today originally appeared on Fool.com.
Steve Symington owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.