DouYu International Holdings Limited Announces Plan to Implement ADS Ratio Change

Rhea-AI Summary

DouYu International Holdings (DOYU) announces a change in the ratio of its American depositary shares, affecting ADS holders with a one-for-ten reverse split. The change is set to take effect on March 28, 2024, impacting the ADS trading price on the Nasdaq Global Select Market.

Insights

Market Research Analyst

The adjustment in the ADS ratio by DouYu International Holdings Limited represents a strategic move that could influence investor perception. Historically, reverse splits are often employed by companies to boost the stock price to meet exchange listing requirements or to appeal to a different class of investors. In this case, the one-for-ten reverse ADS split indicates a reduction in the number of ADSs available, which theoretically increases the price of each ADS.

It's important to note that while the share price may increase, the market capitalization of the company remains unchanged, as this is purely a cosmetic alteration. Investors should be aware that the intrinsic value of their holdings does not increase as a result of this action. Furthermore, a higher share price can sometimes reduce liquidity, as each share becomes more expensive to purchase. This move could also be interpreted as an effort to convey a more stable and established company image, as higher-priced stocks are often perceived as less volatile.

Financial Analyst

From a financial perspective, the ADS Ratio Change for DouYu could affect the stock's volatility. Typically, stocks with higher per-share prices exhibit lower volatility, which might appeal to risk-averse investors. However, it's also essential to scrutinize the underlying reasons for the reverse split. If the company is struggling to maintain its listing status due to a low share price, this could be a red flag signaling deeper financial issues.

Investors should closely monitor the company's performance indicators post-ADS Ratio Change, such as earnings, revenue growth and operational efficiency, to better understand the long-term implications. Moreover, the company's assurance that the post-change ADS price will be higher should be taken with caution, as market forces ultimately determine stock prices.

Securities Legal Expert

Legally, the ADS Ratio Change is a non-dilutive event that should not affect shareholders' equity. However, shareholders with fractional ADSs will be compensated with the sale proceeds, which could result in minor discrepancies between expected and actual values received. Shareholders should review the terms of the ADS Ratio Change to ensure they understand the implications, such as the potential tax consequences of receiving cash in lieu of fractional shares.

It's also important for the company to comply with the regulations of the Nasdaq Global Select Market and the Securities and Exchange Commission (SEC) when conducting such corporate actions. Proper disclosure and transparency with shareholders are essential to maintaining trust and avoiding legal complications.

WUHAN, China, March 15, 2024 /PRNewswire/ -- DouYu International Holdings Limited ("DouYu" or the "Company") (Nasdaq: DOYU) today announced it plans to change the ratio of its American depositary shares (the "ADSs") to ordinary shares of the Company with a par value of US$0.0001 per ordinary share (each, an "Ordinary Share," and collectively, the "Ordinary Shares") from ten (10) ADSs representing one (1) Ordinary Share to one (1) ADS representing one (1) Ordinary Share (such change, the "ADS Ratio Change").

For DouYu's ADS holders, this ADS Ratio Change will have the same effect as a one-for-ten reverse ADS split. There will be no change to DouYu's Ordinary Shares. No action is required by holders of uncertificated ADSs to effect the ADS Ratio Change, as the change will be effected on the books of the ADS depositary. Any fractional ADSs will be sold, and the net proceeds from the sale of fractional ADSs will be distributed to the holders entitled thereto.

The effect of the ADS Ratio Change on the ADS trading price on the Nasdaq Global Select Market is expected to take place at the open of business on March 28, 2024 (U.S. Eastern Time). As a result of the ADS Ratio Change, the ADS price is expected to increase proportionally, although the Company can give no assurance that the ADS price after the ADS Ratio Change will be equal to or greater than ten times the ADS price before the change.

About DouYu International Holdings Limited

Headquartered in Wuhan, China, DouYu International Holdings Limited (Nasdaq: DOYU) is a leading game-centric live streaming platform in China and a pioneer in the eSports value chain. DouYu operates its platform on both PC and mobile apps to bring users access to immersive and interactive games and entertainment livestreaming, a wide array of video and graphic contents, as well as opportunities to participate in community events and discussions. By nurturing a sustainable technology-based talent development system and relentlessly producing high-quality content, DouYu consistently delivers premium content through integration of livestreaming, video, graphics, and virtual communities with a primary focus on games, especially on eSports. This enables DouYu to continuously expand its user base and enhance its user experience. For more information, please see http://ir.douyu.com/.

Safe Harbor Statements

This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward- looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's results of operations and financial condition; the Company's business strategies; general market conditions, in particular the game live streaming market; the ability of the Company to retain and grow active and paying users; changes in general economic and business conditions in China; the impact of the COVID-19 to the Company's business operations and the economy in China and globally; any adverse changes in laws, regulations, rules, policies or guidelines applicable to the Company; and assumptions underlying or related to any of the foregoing. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the Securities Exchange Commission. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.

Investor Relations Contact

In China:

Lingling Kong
DouYu International Holdings Limited
Email: ir@douyu.tv
Tel: +86 (10) 6508-0677

Andrea Guo
Piacente Financial Communications
Email: douyu@tpg-ir.com
Tel: +86 (10) 6508-0677

In the United States:

Brandi Piacente
Piacente Financial Communications
Email: douyu@tpg-ir.com
Tel: +1-212-481-2050

Media Relations Contact

Lingling Kong
DouYu International Holdings Limited
Email: pr_douyu@douyu.tv
Tel: +86 (10) 6508-0677

 

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SOURCE DouYu International Holdings Limited

FAQ

What change did DouYu International Holdings (DOYU) announce regarding its American depositary shares?

DouYu plans to change the ratio of its American depositary shares from ten ADSs representing one Ordinary Share to one ADS representing one Ordinary Share.

What is the effect of the ADS Ratio Change on ADS holders?

The ADS Ratio Change will have the same effect as a one-for-ten reverse ADS split for DouYu's ADS holders.

When is the expected date for the ADS Ratio Change to take place?

The ADS Ratio Change is expected to take place on March 28, 2024, at the open of business (U.S. Eastern Time).

How will the ADS price be impacted by the ADS Ratio Change?

The ADS price is expected to increase proportionally as a result of the ADS Ratio Change, although there is no assurance that it will be equal to or greater than ten times the ADS price before the change.