(Yicai Global) Aug. 9 -- Chinese search engine operator Sogou, whose USD3.5 billion merger with Tencent Holdings was approved last month, returned to profit in the second quarter thanks mainly to a change in the fair value of an investment in an online question-and-answer website.
Net income was USD39.9 million in the three months ended June 30, compared with a net loss of USD8.5 million a year earlier, the Beijing-based company said in an earnings report released today. Revenue fell 44 percent to USD147.5 million. It had an operating loss of USD35.9 million.
The net income was primarily due to a USD76.2 million unrealized gain from a change in the fair value of an investment in Q&A platform Zhihu, while the lower revenue was largely the result of uncertainties among certain advertisers with respect to Sogou’s business policies as a result of Tencent’s proposal to take the company private, according to the report.
Shenzhen-based Tencent made a takeover bid for Sogou last September, hoping to acquire all remaining shares for USD9 each. As the top shareholder before the bid, Tencent owned about 40 percent of US-listed Sogou. Sogou expects the merger to happen before the end of the year, the earnings report said.
Sogou, a subsidiary of portal Sohu founded in 2004, is China’s largest search engine and Chinese input method service provider after Baidu.
It went public in New York in 2017. At the market close on Aug. 6, Sogou’s shares [NYSE: SOGO] were little changed at USD8.78 apiece, giving the firm a market cap of USD3.4 billion.
Editor: Peter Thomas