Is YY a No-No?

A recent filing with the Securities and Exchange Commission has disclosed that Steadfast Capital Management, a hedge fund run by Robert Pitts, owns nearly 30 million shares of YY Inc. (YY). The Chinese social networking software company went public in late November at a price of $10.50 and is currently trading close to $14. YY users form and interact with online groups on PCs and smartphones, and YY provides entertainment-based communities for performing artists and gamers. The current market capitalization is less than $800 million, but it has traded at least 200,000 shares each trading day since going public and so the daily dollar volume is well over $2 million for now.

This was the first Chinese initial public offering in the U.S. in about eight months, as a number of factors -- including poorer economic numbers in the country as well as ongoing concerns about accounting practices -- have led to the market souring on Chinese companies. YY boasts an impressive collection of investors, including Tiger Global Management, Disney (DIS) and Steadfast. Of course, being Chinese is only half of being a Chinese social networking company, and investors are well aware that companies such as Facebook (FB) and Zynga (ZNGA) have seen declining stock prices this year. That seems to have also affected YY's valuation: a fundraising round about two years ago valued YY at about $1 billion and the current market cap is a good bit lower than that....281 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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