Weibo IPO to Offer 20M ADS - Analyst Blog

SINA Corp SINA subsidiary Weibo Corp recently filed an amended F-1, under which it offered 20 million American Depository Shares ADS at a price range of $17.00 to $19.00. At the mid-point of the price range, Weibo expects to raise $360.0 million.

Launched by SINA in Aug 2009, Weibo is also known as China's Twitter TWTR. Weibo primarily offers short messaging/micro blogging service in Chinese and has approximately 143.8 million monthly active users (MAUs) worldwide. Goldman Sachs GS and Credit Suisse CS are the primary underwriters.

It is noteworthy that Weibo selected Nasdaq NDAQ for listing and will trade under the symbol “WB.” Post-IPO, SINA's stake in Weibo will decline to 58.0% from 78.0%, while Alibaba's stake will jump to 32.0% from approximately 19.0%. Alibaba invested approximately $585.0 million in Apr 2013.

Through the ADS issue, the public will own 9.0% and management and employees will own 1% (down from 2.7%). Per Forbes, Weibo appears to be fairly priced based on its current valuation of $4.0 billion, which is approximately one-thirteenth of Baidu's BIDU market cap of $52.0 billion.

Weibo generates advertising revenues mostly from display ads, which were introduced in 2012 and to a much lesser extent from promoted feeds, which were introduced in 2013. The company's revenues increased significantly from $65.9 million in 2012 to $188.3 million in 2013.

Advertising and marketing contributed 78.8% of revenues in 2013. Mobile revenues accounted for 28.0% of SINA's advertising and marketing revenues in 2013.

We believe that Weibo's post-IPO performance will significantly depend on its mobile user growth and monetization efforts. However, intensifying competition from Tencent's Wechat and Weixin remains a major headwind.

Moreover, a successful Weibo IPO will boost SINA's share price going forward. However, strict Chinese government regulations and concerns related to accounting standards can dampen Weibo's IPO.

Currently, SINA has a Zacks Rank #5 (Strong Sell).