BEIJING – Zhihu Inc. (NYSE:ZH), a company specializing in business services, has announced a conditional voluntary cash offer to repurchase up to 46,921,448 of its Class A ordinary shares, including those in the form of American Depositary Shares (ADSs), for HK$9.11 per share. This price is equivalent to US$3.50 per ADS, as stated in a report filed with the U.S. Securities and Exchange Commission today.
The buyback offer is being made by Deutsche Bank AG (NYSE:DB), Hong Kong Branch, on behalf of Zhihu Inc. The transaction is part of the company's effort to enhance shareholder value and is a common practice among publicly traded companies seeking to manage their capital structure.
The announcement was signed by Han Wang, the Chief Financial Officer of Zhihu Inc., and the buyback is set to take place in July 2024. The company's decision to proceed with a share repurchase program underscores its financial strategy and commitment to managing its equity effectively.
The information regarding this corporate action is based on the latest SEC filing by Zhihu Inc.
In other recent news, Zhihu Inc. has announced the granting of Restricted Share Units (RSUs) as part of its 2022 Share Incentive Plan, a strategic move to align employee interests with those of shareholders. The RSUs, a common tool used by public companies to motivate employees, represent a promise to grant shares of the company's stock at a future date, subject to certain conditions.
In related news, Zhihu Inc. has been subject to an adjusted outlook from Citi, which has lowered its price target for the company's shares. This revised target is based on Zhihu's breakeven strategy, which aims to optimize lower-efficiency projects and business operations, expected to result in a decrease in both revenue and operating expenses.
Zhihu's management anticipates significant improvements starting from the second quarter of 2024, with the year seen as pivotal for the company as it shifts towards a strategy focused on quality growth.
Despite these strategic adjustments, Citi has expressed reservations due to the limited visibility on Zhihu's long-term growth trajectory, leading to lowered revenue forecasts for 2024. Nonetheless, Citi maintains its Buy rating on Zhihu, reflecting an expectation that the company's cash flow will improve as it moves towards breakeven.
These developments underscore the company's strategic adjustments and the challenges it faces in the current macroeconomic climate.
InvestingPro Insights
In light of Zhihu Inc.'s recent announcement regarding its share repurchase program, investors may find it useful to consider some key financial metrics and insights from InvestingPro. With a market capitalization of $295.49 million and a price-to-book ratio of 0.49 as of the last twelve months leading up to Q1 2024, Zhihu appears to be valued lower than its net asset value, which could indicate the shares are undervalued.
Furthermore, the company's revenue growth over the last twelve months was 8.03%, which suggests a positive trend in business performance. However, it's important to note that analysts do not anticipate Zhihu will be profitable this year, and the company has experienced a price decline of 55.26% over the past year. These factors, combined with the fact that Zhihu holds more cash than debt on its balance sheet but is quickly burning through cash, present a mixed financial picture that shareholders should consider.
InvestingPro Tips for Zhihu Inc. suggest that while the company has liquid assets exceeding short-term obligations, which is a positive sign for financial stability, the valuation implies a poor free cash flow yield. Additionally, Zhihu does not pay a dividend to shareholders, which may influence the investment decisions of income-focused investors.
For those considering a deeper analysis, InvestingPro offers additional tips that could provide further insights into Zhihu's financial health and future prospects. Shareholders and potential investors can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, which includes access to these valuable tips. Currently, there are 11 additional InvestingPro Tips available for Zhihu Inc., which can be accessed at: https://www.investing.com/pro/ZH
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