NEW YORK (TheStreet) -- Shares of 500.com (WBAI) were gaining 5.2% to $25 on heavy trading volume Tuesday after the Chinese online sports lottery service provider announced that Tsinghua Unigroup International took a stake in the company.
Tsinghua Unigroup will buy 63,500,500 newly-issued Class A ordinary shares of 500.com for about $123.8 million in cash.
Following the offering Tsinghua Unigroup will own 15.2% of 500.com.
"We want to welcome Tsinghua Unigroup as a shareholder to our company and to express our appreciation to Tsinghua Unigroup's confidence in our company," 500.com CEO Zhengming Pan said ina statement. "We believe the partnership between Unigroup and our company will be long term and mutually beneficial."
About 2.3 million shares of 500.com were traded by 10:28 a.m. Tuesday, above the company's average trading volume of about 1.9 million shares day.
TheStreet Ratings team rates 500.COM LTD -ADR as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate 500.COM LTD -ADR (WBAI) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 300.00% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, WBAI is still more expensive than most of the other companies in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 289.6% when compared to the same quarter one year ago, falling from $4.43 million to -$8.40 million.
- 500.COM LTD -ADR has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, 500.COM LTD -ADR increased its bottom line by earning $0.70 versus $0.51 in the prior year. For the next year, the market is expecting a contraction of 12.4% in earnings ($0.61 versus $0.70).
- The gross profit margin for 500.COM LTD -ADR is currently very high, coming in at 87.48%. Regardless of WBAI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WBAI's net profit margin of -52.65% significantly underperformed when compared to the industry average.
- In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, 500.COM LTD -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: WBAI Ratings Report