58.com Inc., a Craigslist-style online service that lists classified ads for products, jobs, housing and services, plans to spin off its used-car trading platform.
58.com said it will divest a controlling 54-percent interest in its Guazi.com Inc. subsidiary to Co-chairman Mark Haoyong Yang in exchange for cash.
Yang, who will become the used-car website's CEO, will invest $600 million (3.8 billion yuan), Chinese news portal Sina.com reported.
"As the middle class develops and they consume more, one of the first things they buy is cars," said Wayne Lin, a money manager at QS Investors LLC who invests in Chinese stocks. "58.com may just be positioning more specifically by spinning it off and saying that there may be faster growth other than a Craigslist kind of site."
A 58.com spokeswoman in the U.S. said the company declined to comment on financial terms of the deal, which wasn't disclosed in the statement.
"We see this move as positive for 58.com's share price, as the market previously discounted the money-burning segments, especially the used-car segment Guazi," Credit Suisse Group AG analysts led by Evan Zhou said in a note to investors. "It should greatly help investor sentiment toward 58.com cash burden and profitability trajectory in the coming years."
China's technology and e-commerce companies are battling for market share, with 58.com expanding its offerings and building its customer base through mergers and acquisitions. It broadened real-estate listings in March after purchasing Anjuke Inc. and bought a minority stake in To8to, an online interior decorating service.
The company's shares have gained 38 percent this year, compared with a 13 percent increase in the Bloomberg gauge of Chinese ADRs.