Some Alibaba-SINA-Weibo background -- my bolding below. Looks like Alibaba got a sweet deal.
Sina: Alibaba Buys Weibo Shares At IPO Discount, Maxim Downgrades
By Shuli Ren
March 18, 2014, 10:20 A.M. ET
http://blogs.barrons.com/emergingmarketsdaily/2014/03/18/sina-alibaba-buys-weibo-shares-at-ipo-discount-maxim-downgrades/
China‘s Twitter-like microblog Weibo filed for an IPO in the US last Friday, hoping to raise $500 million. Shares of Weibo’s majority shareholder Sina Corp. (SINA) jumped 6.6% yesterday.
In the same filing, Alibaba Group, which owns 18% of Weibo, said it would increase its equity ownership to 30%, at the terms agreed on last April, when Alibaba bought the current 18% stake from Sina for $586 million. Yahoo! (YHOO) is one of Alibaba’s largest shareholders.
According to that deal, Alibaba may purchase the additional 12% stake at either 15% lower than Weibo’s IPO price or one that values Weibo at $5.5 billion, whichever is lower.
That Alibaba Group may purchase shares of Weibo ” – at a discounted price from the public offering without additional revenue or asset contribution – could discourage IPO subscription,” complained Maxim Group analyst Echo He, who downgraded his rating from Buy to Hold and removed the $90 price target.
In addition, where Sina is currently trading – at $66.3 this morning – the valuation is already fair. Here is He again:
Also, a reduction of equity ownership of Weibo may reduce SINA’s valuation as a parent company, especially when the proceeds from selling ownership to Alibaba may not generate returns comparable to Weibo in the foreseeable future. Assuming 75% of SINA’s current operations are supported by Weibo, $5B, $6B, or $7B Weibo valuations indicate $4B, $4.7B, or $5.3B SINA valuations—or $57/share, $67/share, or $76/share. Hence, SINA is likely trading at a fair valuation.
Shares of Sina are trading 3.1% lower this morning. |
