December 11, 2014 / 6:59 AM / 3 years ago

Momo shares shrug off allegations against CEO in debut

(Reuters) - Shares of Momo Inc, a Chinese mobile chat app firm backed by Alibaba Group Holding Ltd, jumped as much as 30 percent in their debut, shrugging off allegations of misconduct and corruption against the company’s chief executive.

Momo’s American depositary shares (ADS) closed at $17.02 on the Nasdaq on Thursday, valuing the company at about $3 billion.

The company’s CEO and co-founder Tang Yan faces allegations of stealing information and technology from former employer NetEase Inc, where he was a senior executive from 2003 to 2011.

Tang, who has a controlling stake in Momo, will fight the allegations, the company said on Wednesday.

“It was not a surprise to us ... when China-based Internet companies come out for IPO, in the background, there is always noise,” Chief Financial Officer Jonathan Zhang told Reuters.

Momo also faces an intellectual property lawsuit from Hangzhou Momo Wedding Service Co, a relationship networking firm, over its trademark.

There were signs of the allegations being connected, Jonathan said, but did not elaborate.

The allegations could hurt its business, Momo had warned in its filing.

Alibaba, which owns a fifth of Momo, said there was no merit to claims against Tang.

“Momo is a young, growing company and Alibaba Group fully supports its management team,” an Alibaba spokeswoman said.

Momo — which helps users find friends based on locations and exchange messages, pictures and videos — had 60.2 million active users in September.

Its app trails Chinese Internet conglomerate Tencent Holdings Ltd’s WeChat and Mobile QQ.

Momo’s revenue comes mainly from membership fees. The company, which has marketing agreements with Alibaba and 58.com Inc, also generates revenue through advertisements, mobile games and paid emoticons.

Alibaba will buy $50 million of Momo’s Class A ordinary shares in a private placement. Venture capital firms Matrix Partners and Sequoia Capital also hold shares in Momo.

Momo’s revenue jumped to $26.2 million in the nine months ended Sept. 30, from $817,000 a year earlier. Its net loss widened to $22.9 million.

The company raised $216 million from its initial public offering of 16 million ADS and plans to use the proceeds for marketing and research. The offering was priced at $13.50 per share, the midpoint of the expected range of $12.50-$14.50.

Morgan Stanley, Credit Suisse and JPMorgan were among the lead underwriters of the offering.

Reporting by Matthew Miller, Beijing Newsroom and Tanya Agrawal and Amrutha Gayathri in Bengaluru; Editing by Muralikumar Anantharaman, Saumyadeb Chakrabarty, Sriraj Kalluvila and Joyjeet Das

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