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 Investors are watching the biggest debut of a Chinese Internet
company in years, hoping for clues as to demand for the highly
anticipated IPO of far larger e-commerce giant Alibaba Group Holding
Ltd <IPO-ALIB.N>.
Sina Weibo's early gains came after the owner of a Chinese
Twitter-like messaging service priced its shares at the very bottom
of a target range of $17 to $19, and cut its offer to 16.8 million
American Depositary Shares from 20 million.
The stock soared as much as 41 percent to $24.48 in early afternoon
trading, valuing the company at about $4.7 billion.
That surge caught some investors off-guard because of its well-known
susceptibility to unpredictable Chinese censorship and the uncertain
outcome of intense domestic competition with the likes of Tencent
Holdings Inc<0700.HK>.
"People had concerns that there's some competition over there and
that engagement on Weibo may be challenged in the future, but I
think Weibo is still a social media platform, that people still use
it every day," said Henry Guo of JG Capital.
"I'm expecting the censorship and monitoring to continue. But I
don't see any risk as far as Weibo's existence."
Weibo, in which Alibaba owns a stake, often prompts comparisons with
Twitter Inc <TWTR.N> but its market value is a fraction of the San
Francisco company's. At Wednesday's close, Twitter was valued at
about $26 billion.
Weibo, whose name means "micro blog" in Chinese, has grown at
breakneck speed in a country where Twitter is banned, but there's
evidence that its user growth has slowed as China cracks down on
criticism of the ruling Communist Party.
A rule that took effect in September imposes a prison sentence of up
to three years for those who knowingly share false information
online. That had a chilling effect on Weibo.
Research commissioned by Britain's The Telegraph found that posts
fell as much as 70 percent after rule was announced.
And it's also battling intense domestic competition. People who once
used sites such as Weibo's are now flocking to messaging apps such
as Tencent Holdings Ltd's <0700.HK> WeChat.
Unlike Weibo, WeChat allows users to communicate in private circles
of friends. The service leaped from 121 million global monthly
active users at the end of September 2012 to 272 million in just a
year.
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Yet WeChat itself isn't immune to government censorship. Last month,
authorities closed dozens of popular accounts, including those held
by widely read columnists and investigative journalist Luo
Changping.
A GOOD START
Sina Weibo's sterling debut could pave the way for its peers.
Alibaba is expected to file as early as next week for a U.S. IPO
that could raise as much as $15 billion. That would make it the
biggest internet company IPO since Facebook Inc's <FB.O> $16 billion
coming-out party in 2012.
U.S. IPOs raised more than $18 billion in the first three months of
the year, making it the best quarter in more than a decade.
Technology companies raised about $4 billion of the total, compared
with $1 billion in the same period last year.
But investors may be having second thoughts as valuations — particularly for tech and biotech companies — become stretched. The
Nasdaq Composite index <.IXIC> has fallen about 6.5 percent since
its March 6 high, and recorded its biggest one-day drop in two and a
half years last week.
Sina Weibo's offering, whose lead underwriters were Goldman Sachs
and Credit Suisse, raised $286 million, much of which will go to its
parent. Weibo is controlled by Web portal company Sina Corp <SINA.O>,
whose stake falls to 56.9 percent from 77.
Alibaba, which paid $585.8 million for an 18 percent stake in the
company last year, will increase its holding to 32 percent and will
also appoint a director to the board.
(Reporting by Tanya Agrawal in Bangalore and Yimou Lee, Elzio
Barreto and Denny Thomas in Hong Kong; editing by Ted Kerr and John
Pickering)
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