A group of investors that made an unsolicited and non-binding offer back in June to take Qihoo 360 Technology Co. Ltd. (NYSE:QIHU) private at $77 per American Depositary Share (ADS) is considering cutting its bid, as the company’s valuation has been hit by the recent economic turmoil in China, according to the Wall Street Journal citing people familiar with the matter. The stock of the company closed at $51.29 on Thursday, which was way below the aforementioned offer. The $77-a-share offer was made by the company’s chairman, Zhou Hongyi, and other investors, including venture-capital firm Sequoia Capital China and securities firm Citic Securities Co. It seems that stock market participants have overlooked the standing buyout offer and put up for sale the company’s shares in an attempt to cut the exposure to China, whose economy is believed to be in a bad shape at the moment. The members of the investor group that made the offer back in June might not be that eager to pay an enormous premium for the Internet-services provider. The shares of Qihoo 360 have gained over 8% in today’s trading session, after the market was reminded of the potential buyout deal.
Due to the fact that the offer made by the consortium of investors was non-binding, the buyout group can eventually modify the initial terms of the offer or withdraw it at last. Therefore, it is highly likely that the potential “soon-to-be acquirer” of Qihoo 360 will come back with a lower offer to take the company private.
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In the meantime, 32 funds among those tracked by Insider Monkey were bullish on Qihoo 360 Technology Co. Ltd. (NYSE:QIHU) at the end of the second quarter, compared to 25 funds at the end of the prior quarter. Nevertheless, the aggregate value of the positions held by these investors didn’t change much during the quarter, increasing to $643.90 million from $630.80 million. Moreover, these investors held around 7.40% of the company at the end of June, which also supports the bullish sentiment regarding Qihoo 360.
Among the investors from our database, Daniel S. Och’s OZ Capital Management represents the largest shareholder of Qihoo 360, holding a 3.21 million-share stake as of June 30 after boosting its stake by nearly a million shares during the second quarter. Karthik Sarma’s SRS Investment Management is also among the largest shareholders of the Internet services provider with nearly 1.12 million shares. Let’s not forget to mention Valiant Capital Management, a long/short equity hedge fund founded by Christopher R. Hansen, which owns 1.03 million shares of the company as of the end of June.
To sum up, even though the group of investors that intends to take Qihoo 360 Technology Co. Ltd. (NYSE:QIHU) private might be lowering its previously-announced bid of $77 per ADS, the updated value of the deal will most likely represent a premium for investors in order to incentivize them into supporting the deal and selling their shares.
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