Will Sina Weibo Spin Off In IPO? Billions Of Reasons To Do So
We may soon find out how much China’s hot microblog Sina Weibo is worth — and how much more Sina Corp. CEO Charles Chao is worth — as China’s 21st Century Business Herald reports, citing a single Sina source, that the company is in talks with investment banks for an initial public offering.
The report comes on the heels of earlier rumors, and remains a thinly sourced story. However, there are some good business reasons to consider spinning off the social networking service, and a Weibo IPO seems to make sense for Sina boss Chao for one big additional reason: money. Chao came to Sina in 1999 as a professional manager, so he is not a founding tech billionaire like some of his peers in China, including Robin Li at Baidu, Pony Ma at Tencent, Jack Ma at Alibaba Group and Ding Lei at Netease. But he is the founder of Sina Weibo.
Chao has only a sliver of equity in Sina Corp. — probably at most 2% of the company, including an unknown share of a 2009 management buy-out stake. He launched Weibo as CEO in August 2009, eventually creating a separate business unit for it within the company (it now has 600 employees, out of 3,400 at Sina Corp.). For background on Sina Weibo, which is basically a Chinese Twitter with some Facebook look-and-feel, see my story in the latest issue of Forbes Asia magazine.
What kind of value could Chao realize from a Weibo IPO? As I wrote in a blog post last week, analysts disagree widely on the value of Weibo, which has rocketed to more than 100 million users in 18 months but has yet to begin monetizing. Given the current climate for China Internet stocks like Youku.com and E-Commerce China Dangdang, though, it seems certain that investors would place a premium on a Weibo IPO.
By that logic, Sina Weibo, valued by analysts at anywhere from $1 billion to $3 billion, could achieve a stock market capitalization of, say, $3 billion to maybe $4 billion, compared to a $5.6 billion valuation for all of Sina Corp. (including Weibo) right now. It is unclear how much of that unlocked treasure of value would belong to Chao as Weibo’s creator, but it surely won’t be just a sliver. Top Weibo developers would also be rewarded for their work in building China’s hottest Internet phenomenon of the last year.
Of course, an IPO would also have very practical business implications, namely giving Weibo a huge war chest to invest in the service, delay monetization to build its customer base and distance Weibo from its competitors, including the microblogs of Tencent and Sohu.
When I interviewed him last month, Chao told me that there were no plans "right now" to spin off the unit in an IPO. His full quotes look more interesting in the context of this latest report.
"I don’t think we have a plan to spin off right now, but obviously we will do what is the best to develop this product, in terms of making it can grow faster independently going forward," Chao said. "So we do not have a plan to spin off, but obviously if we think this is in the best interest to unleash the value and also for that platform to grow better, then we can not rule out that possibility in the future, but right now we don’t have [such a] plan."
When I asked him about the equity incentive for those who helped create Weibo, he said: "There is an independent, separate entity for Weibo for sure, but Weibo right now is the whole company’s effort, basically, so it’s too early to separate all these things." Chao described Weibo as the "growth engine" for Sina.
"That’s this company’s engine, so it should be the focus, because for our company to grow, we have to focus on the future," Chao said. "I believe this is the future of the company."
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