(Yicai) Dec. 8 -- Douyu International Holdings’s shares rose after the Chinese game livestreaming platform said it had turned a profit in the third quarter, two weeks after its founder was arrested on suspicion of opening a casino. 

After soaring by as much as 12.5 percent in New York yesterday, Douyu [NASDAQ: DOYU] ended 2.4 percent higher at 74 US cents a share. But the Wuhan-based firm still faces the risk of being delisted as the closing price remains below USD1.

Net profit was CNY76.4 million (USD10.5 million) in the three months ended Sept. 30, versus a net loss of CNY6.6 million (USD927,463) a year earlier, Douyu said in an earnings report the same day. Revenue slumped 24 percent to CNY1.4 billion (USD186.3 million).

Douyu swung back into the black for the first time in two years in the first quarter of 2023, posting net profit of CNY14.5 million. Its second-quarter profit came in at CNY6.8 million.

“Amid a complex macroeconomic environment, we proactively refined our monetization and marketing strategies, effectively stabilizing our financials in the third quarter,” said Vice Presdient Cao Hao. “Both our gross margin and adjusted net margin have now improved for three consecutive quarters.”

The number of monthly active users of Douyu’s mobile app fell 9.5 percent to 51.7 million, and premium users sank 30 percent to 3.9 million because of the firm's cost control measures.

The third-quarter earnings results come after Douyu said on Nov. 21 that Chen Shaojie, its founder, chairman, and chief executive officer, had been arrested by Chengdu police on or around Nov. 16. Douyu had not received any official reason for his arrest, it added.

On Nov. 22, police in Chengdu, capital of China’s Sichuan province, said that following an initial investigation Chen was suspected of opening a casino and had been arrested. Casino gambling is illegal in the Chinese mainland. The case is still under investigation.

In the wake of the arrest, Douyu formed an interim management committee on Nov. 24, consisting of Chief Strategy Officer Su Mingming, VP Cao Hao, and VP Ren Simin.

Douyu is operating as normal and will continue to closely monitor the investigation and disclose information when necessary, Cao said on the firm’s third-quarter earnings conference call. The company is committed to legal compliance and will take all necessary measures against any violation of platform rules, he added.

On Oct. 25, Douyu said in a statement that the closing price of its American depository shares remained below the lowest buy-in price of USD1 for the previous 30 consecutive trading days, so if the share price fails to return above USD1 before April 22, next year, it will probably be delisted.

Editors: Dou Shicong, Martin Kadiev