Leju Stock Rallies on Potential Aliaba Partnership

Earlier this year, Leju reported revenue in 2019 increased 50% year-over-year.

Author: CapitalWatch Staff   

The stock in Leju Holdings Ltd. (NYSE: LEJU) was trading up 6%, at $3.99 per American depositary share, Friday afternoon on news that it may gain backing from Chinese giant Alibaba Group.

According to the company statement, real estate services company E-House (China) Enterprise Holdings Ltd. (HKEX: 02048) will acquire a 56.19% stake in Leju. At the same time, E-House is receiving an investment from Alibaba (NYSE: BABA; HKEX: 9988) which will raise its stake in E-House to about 8.32%, in addition to the placement of the convertible bond.

Alibaba and E-House have agreed to cooperate on "online-offline real estate transaction, digital marketing, and after-sale services with the goal of enhancing the digital and intellectual capabilities of the real estate service industry," the report said.

Further, the two will build an online real estate marketing platform and digital transaction network.

Leju's executive chairman, Xin Zhou, explained his company's role in the partnership: "In the process of collaborating with E-House and Alibaba to build an online real estate marketing and transaction platform, Leju will leverage its experience in online marketing and transaction service and become the service provider for digital marketing and operation on the platform."

The closing of the deal is yet subject to certain conditions. Upon the transaction, Leju will become a subsidiary of E-House.

Earlier this year, Leju said in its delayed annual report that its revenue in 2019 increased 50% year-over-year to $692.6 million. Losses last year narrowed to $10.9 million, according to the filing.

The largest revenue segment of Leju is e-commerce services related to new residential property sales. Its services include "selling discount coupons and facilitating online property viewing, physical property visits and pre-sale customer support." Leju also sells online advertising on Sina Inc. (Nasdaq: SINA) real estate websites. Sina is a shareholder in Leju and is the selling party in the E-House deal.

Lastly, Leju offers fee-based online property listing services to real estate agents, but revenue in this segment has declined on an annual basis from $14.5 million in 2017 to $1.6 million in 2019.

In its annual filing, Leju said that it has witnessed a negative impact from the Covid-19 outbreak, but it has yet to report the extent to which its business has suffered. During the first two quarters, LEJU stock has waivered mostly below the $2-mark, until its 2019 performance uplifted it in trading.

E-House saw its shares jump 3% in Hong Kong Friday to HK$11.20 apiece. Shares in Sina, after an early dip, traded up 34 cents in the afternoon on the Nasdaq, at $40.30 per ADS.