BEIJING - Zhihu Inc. (NYSE: ZH; HKEX: 2390), a prominent online content community in China, has announced a change in the ratio of its American depositary shares (ADSs) to Class A ordinary shares. The adjustment will shift from two ADSs representing one Class A ordinary share to one ADS representing three Class A ordinary shares. This change is slated to take effect on May 10, 2024.
For holders of the company's ADSs, this modification will equate to a one-for-six reverse ADS split. Starting on the effective date, every six ADSs owned will need to be exchanged for one new ADS. JPMorgan Chase (NYSE:JPM) Bank, N.A., the depositary bank for Zhihu's ADS program, will manage the exchange process. Zhihu's ADSs will maintain their listing on the New York Stock Exchange under the ticker "ZH."
The company will not issue fractional new ADSs. Instead, fractional entitlements will be consolidated and sold, with the net cash proceeds, after deducting any fees, taxes, and expenses, distributed to the respective ADS holders. The adjustment will not affect the company's underlying Class A ordinary shares, and no shares will be issued or cancelled as a result of the ADS Ratio Change.
Zhihu anticipates that the ADS trading price might proportionately increase following the implementation of the change. Still, the company has not guaranteed that the post-change ADS trading price will be equal to or exceed six times the price prior to the modification.
This announcement is based on a press release statement and should be considered in the context of forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, and actual outcomes may differ materially from expectations.
InvestingPro Insights
Zhihu Inc. (NYSE: ZH; HKEX: 2390) has recently made headlines with its decision to adjust the ratio of its American depositary shares (ADSs) to Class A ordinary shares. As investors and stakeholders look to understand the potential implications of this corporate action, InvestingPro provides key metrics and insights that can help in assessing the company's current financial health and market position.
According to InvestingPro data, Zhihu Inc. holds a market capitalization of $381.95 million USD and has experienced a revenue growth of 16.48% in the last twelve months as of Q4 2023. Despite this growth, the company's P/E ratio stands at -3.50, reflecting the challenges it faces in achieving profitability.
Moreover, the price has seen a significant decline, with a -44.43% one-year total return as of the latest data. This trend aligns with the InvestingPro Tip that suggests the stock price has performed poorly over the last decade and has taken a significant hit over the last six months.
For those considering the potential long-term value of Zhihu Inc., it's worth noting that the company holds more cash than debt on its balance sheet and liquid assets exceed short-term obligations, which are both positive indicators of financial stability.
Still, it is also important to consider the analysts' outlook, which includes an anticipated sales decline in the current year and no expectation of profitability for the year as per InvestingPro Tips. These insights could be critical for investors weighing the risks and opportunities associated with Zhihu Inc.
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