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Why Line Stock Popped 26% on Wednesday

What happened

Shares of Line Corp. (NYSE: LN) jumped 26.6% on Wednesday after Reuters reported the messaging app company is in talks for a potential merger with SoftBank's Z Holdings (formerly known as Yahoo! Japan). Separately, Z Holdings stock rallied 9.2% today on the news.

So what

Z Holdings confirmed the talks to Reuters late Wednesday, while Line issued a statement that it is indeed "considering ways to improve its corporate value" -- though both companies insisted nothing is set in stone just yet.


Now what

With a combined market capitalization of nearly $30 billion as it stands -- and with a Japanese user base of more than 80 million for Line -- Z Holdings and Line together could represent a veritable force to tackle Japan's budding QR code payment app industry. But the news shouldn't be entirely surprising considering Softbank not only owns nearly half of Z Holdings' outstanding shares, but also acquired a majority (51%) stake in Line's Mobile telco segment early last year.

That certainly doesn't guarantee the two companies will come to terms on a merger. But if they do, Reuters' sources suggested earlier Wednesday that it could happen by the end of this month.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Softbank Group. The Motley Fool has a disclosure policy.


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