initial public offerings (IPOs) trading on American exchanges

Friday, March 14, 2014

China's Twitter "Weibo" files for $500 million IPO

The Chinese version of Twitter, Weibo, filed a preliminary prospectus on Friday for an initial public offering in the U.S. to raise $500 million.

Weibo was developed by Nasdaq-listed Sina Corp., which now owns the 77.6% of Weibo. A subsidiary of Alibaba Group owns another 19.3% through a $586 million investment made last April.

The IPO may be a step toward Weibo’s long-predicted spin-off from Sina. The filing says the transaction agreement “contains provisions relating to the company’s carve-out from Sina,” and that $250 million of the net proceeds will be used to repay loans to Sina.

Launched in 2009, Weibo boasted 129 million monthly active users as of December, according to its IPO filing. It allows users to post a feed of up to 140 Chinese characters with multimedia attachments, and in December alone some 2.8 billion of those feeds were posted. “Weibo allows people to be heard publicly and exposed to the rich ideas, cultures and experiences of the broader world.

“Media outlets use Weibo as a source of news and a distribution channel for their headlines. Government agencies and officials use Weibo as an official communication channel for disseminating timely information and gauging public opinion to improve public services,” says the prospectus.

Yet despite the strong user base and annual revenue of $188 million, Weibo became profitable only in the last quarter of 2013. It generates revenue mainly from “customers who purchase advertising and marketing services, and, to a lesser extent, from platform partners who develop games for our users,” says the F-1 filing.

Intensified censorship in China in the past year has prompted concerns for Weibo’s continued growth, much of which has relied on pointed social and political commentaries from influential verified users. Its competitor Tencent, which has developed the popular messaging and newsfeed app WeChat, is also increasingly challenging Weibo’s dominance in the social media space.

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