If SOHU is currently worth 1.41 Billion, then you take out their cash on hand of approximately 672 million (cash less debt), that equals an enterprise value of only 738 Million. Then, they own 2/3 of CYOU, which has a market cap of 1.24 Billion, so that value would be 827 Million. Essentially, you could buy all of SOHU for 1.41 Billion, get 672 Million in cash, then sell your CYOU shares for 827 Million, and it would cost you -89 million. (This doesn't include that fact you get a company estimated to book over 1 B in sales this year)
SOHU Market Cap 1.41 B
-CASH less debt .672 B
-Ownership in CYOU .827 B
TOTAL COST OF SOHU -.09 B
Am I missing something, or does this look like a pretty good stock to own right now?
Another really strange thing is that the analyst from Hsbc upgraded cyou to $31, and downgraded sohu to $37. Since sohu owns 67% of cyou, why would sohu be worth less if cyou is worth more? Also, sohu has lots of cash and their sogou search engine grew by 102% this quarter.
Sohu raised estimates and cyou lowered estimates by a tiny amount.
I agree with you. Sohu is a steal at this price. It had the best earnings report of any chinese internet company, raised it's forecast, is trading for less than the sum of it's parts, yet still got downgraded. Go figure!