One of China’s top three tech company, Baidu is selling off some of its shares. It is selling a portion of its shares on the country’s leading online travel company, Ctrip.
On Thursday, Ctrip announced the sale of 31.3 million ADSs. It is almost one third of the shares owned by Baidu. With current price of Ctrip share, the estimate value of it would be around $1Billion.
And Baidu still has the option to sell 4.7 million more shares in the next 30 days. It is estimated to be worth about $151 million.
How this shares sale might help Baidu
This move is a strategic move by Baidu to regain a steady foothold. Previously, the company has had to struggle with its stock dropping down in May. Baidu’s stakeholder is not having their best time this year.
But its net cash are mostly in Yuan, makes it almost impossible for the company to use it to buy back its shares at Nasdaq.
Now with the $1 billion from the Ctrip shares, it can proceed the buybacks. An article by Barrons stated that Citibank analyst, Alicia Yap estimated that the $1 billion can boost Baidu’s earnings-per-share about 3%.
Even though this means Baidu will lose one third of its shares in Ctrip, it is still the biggest shareholder of the traveling company. It will still have 13% of Ctrip share.
So this wouldn’t actually be a bad news from Ctrip. Because the remaining shares showed how the tech company still values Ctrip much.
Baidu has been struggling for a while. Even though it was a Google equivalent in China, it seemed not to be able to cope up with the smartphone era. Its search engine and news portal have been left out of the trend by Chinese. Alibaba and Tencent’s products are preferred now.
But it has showed some effort coping up with the new era by having its own cloud service and exporting it to Singapore.