Why Dada Nexus Stock Popped Today

Shares of Dada Nexus (NASDAQ: DADA) were soaring today on news that JD.com (NASDAQ: JD) had proposed acquiring all of its outstanding shares for $2 per American Depositary Share.

As a result, the stock was up 33% as of 10:38 a.m. ET.

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JD seeks to consolidate Dada Nexus

JD.com, the Chinese e-commerce giant and China's largest direct online seller, offered to buy out its on-demand delivery partner at a 42% premium today.

Dada Nexus said it had formed a special committee composed of three independent and disinterested directors to evaluate and consider the proposal.

JD.com has not released a statement on the offer yet, but presumably, the company is proposing an acquisition because it thinks Dada Nexus is a good value at the price. Both stocks have struggled in recent years due to the weak economy in China, but a full acquisition of Dada Nexus could give JD.com ownership of its delivery partner at a good value.

What's next for Dada Nexus

Considering that JD.com is already the majority owner of Dada Nexus and the offer pays a substantial premium, a deal seems more likely than not. Investors seem to be leaning toward acceptance as the stock was trading at $1.88, slightly below the offer price but up substantially from Friday's closing price.

Dada Nexus's revenue is down 7% through the first three quarters of the year, and its operating loss has expanded significantly as well. With headwinds remaining in China and no signs of recovery in the business, a buyout seems to be the best move for shareholders.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.