A few thoughts and stats on Weibo from a Forbes contributor, written about 10 days before the IPO--
Sina Weibo Story Fails To Excite, Despite A Powerful Social Media Platform
Junheng Li Contributor
I write about the Chinese economy.
4/06/2014 @ 7:58PM 5,233 views
forbes.com
During pre-deal investor education in Hong Kong last week, Weibo management was seeking to raise roughly $500mn on a $6bn valuation. The Weibo story have failed to excite Asian investors.
The bear market does not help, neither does a slew of upcoming Chinese IPOs led by Alibaba, Jingdong and Leju, competing for investors and their money.
According to the company’s latest SEC filing, filed after hours on Friday April 4, 20mn IPO shares are now said to be priced at $17-19 per share based on 3.2 to 3.6 billion enterprise value.
Following the IPO, Alibaba will own 32% of Weibo (65mn shares), up from its current 19.3% stake (35mn shares). Sina Corp will sell 24mn shares and WB will issue additional 3mn new shares to Alibaba (in addition to the 20mn IPO shares), the proceeds of which Weibo will use to repurchase shares from Sina management at 15% discount to the IPO price.
Following the IPO, Sina will own 57% of shares (down from 78%), the public will own 9.8%, and the management and employees will own 1% (down from 2.7%).
Weibo appears to be fairly priced. At ~$4bn, Weibo is about 1/13 of Baidu ’s market cap of $52bn, proportional to the market cap ratio between Twitter (~$24bn) and Google GOOG -3.66% (~$365bn).
We recognize Weibo’s asset value as the largest social media platform in China, however management needs to articulate a vision and execution plan to monetize the platform.
We feel that investors are overly concerned about the competition between WeChat and Weibo. In fact, we see WeChat as promoting further mobile internet penetration in China. This will likely directly benefit Weibo, as the most popular mobile social media platform providing reliable and real-time information in China’s rarified news environment.
We see the services as complementary, rather than competitive. WeChat is mainly a multimedia social communication tool, while Weibo is a Twitter-like service with both social and media functionality.
Investors are also overly concerned that social celebrity accounts (called “Big Vs”) are migrating towards WeChat since WeChat opened to public accounts in July and Aug 2013. However, Big Vs are returning to Weibo as their primary broadcasting hub since the beginning of 2014, as evidenced by increased posting on those accounts. We believe Big V’s enthusiasm for and engagement in WeChat declined after many realized that WeChat focuses on promoting communication among closed circles of friends, colleagues and specific social groups, which is very different from Facebook.
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. However, since the available display area on PC and especially on mobile phones limits revenue potential, we believe Weibo post-IPO stock performance will hinge upon the perceived social based monetarization, especially among SMEs. We remain cautiously optimistic.
 
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