HONG KONG: The chairman of Nasdaq-listed Weibo Corp and a Chinese state investor aim to take China’s answer to Twitter private, according to sources, driving the company’s shares up to 50% on Tuesday. According to the sources, a merger could value Weibo at over $20 billion, allow Alibaba’s exit, and result in Weibo relisting in China to take advantage of better valuations.
Three sources indicated that Weibo’s major stakeholder, Chairman Charles Chao’s holding business New Wave, is forming a consortium for the acquisition with a Shanghai-based state company, without revealing the identify of the state firm.
Two sources claimed the consortium is looking to offer around US$90-US$100 per share to take Weibo private, marking an 80%-100% premium to the stock’s US$50 average price over the previous month.
They stated that the group intends to complete the agreement this year.
According to Reuters, Weibo recruited banks to work on a Hong Kong secondary listing in the second half of 2021. According to sources, this is no longer the plan.
After the Reuters article, shares of Weibo, which provides a platform comparable to Twitter, jumped more than 50% in pre-open trade before gaining more than 10% in early New York trade.
Chao did not react to a request for comment from Reuters via Sina, the parent firm of Weibo.
STATEMENT OF WEIBO
Weibo issued a statement denying that Chao and a government investor were in talks to take the business private.
According to Weibo, Chao stated that he had not discussed delisting the business with anyone.
Weibo and Alibaba did not answer to demands for more information from Reuters.
However, three persons familiar with the situation told Reuters that the intentions derive from Beijing’s desire for Alibaba Group Holding Ltd and its affiliate Ant to liquidate their media holdings in order to limit their influence over Chinese public opinion.
Due to confidentiality concerns, all of the sources declined to be identified.
According to Weibo’s annual report, Alibaba owned 30% of the company as of February, valued at US$3.7 billion as of Friday’s close.
CRACKDOWN ON REGULATION
Since last year, Beijing has launched a series of investigations and new rules in an attempt to rein in Chinese billionaire Jack Ma’s Alibaba business empire.
Following Ma’s public criticism of regulators in a speech last October, the crackdown has swept China’s cash-cow internet sector in recent months.
According to Refinitiv statistics, Alibaba has invested in roughly 30 media and entertainment companies, including Hong Kong’s leading English-language newspaper, the South China Morning Post.
According to two of the insiders, Chao’s proposed transaction would likely result in the company leaving Weibo.
According to reports, the initiative also underscores China’s intentions to tighten control over private media and online enterprises.
In the midst of political tensions between Beijing and Washington, U.S. regulators are likely to increase scrutiny and maybe tighten audit standards for Chinese companies listed in the United States.
A handful of Chinese corporations have already gone private or returned to equity markets closer to home via second listings, opting out of US stock exchanges.
According to Dealogic statistics, there were 16 announced delistings of US-listed Chinese companies worth US$19 billion last year, compared to only five such agreements totaling US$8 billion in 2019.
China’s cabinet announced on Tuesday that it would increase oversight of companies listed abroad, citing the need to improve cross-border data flows and security regulation.
A DIFFICULT COMPETITION
Since its introduction in 2009, Weibo has developed at a rapid pace in a market where Twitter is restricted by the government. Weibo is a social media platform used by more than 500 million Chinese people to discuss everything from Korean serial operas to China’s current political intrigue. Alibaba invested US$586 million in Weibo in 2013 for an 18% stake, marking the company’s first major foray into selling advertisements on China’s social networks. Since then, it has increased its stake. The majority of revenue for Weibo, which went public on the Nasdaq in 2014, comes from online advertising. This has alarmed investors as the rate of development of Chinese internet advertising slows, and Weibo has lost ground to rival tech behemoths like ByteDance and Tencent. Last year, the Beijing-based firm’s advertising and marketing income declined 3% to US$1.5 billion. Its stock has risen by 33% this year after falling by 12% in 2020. (In Hong Kong, Julie Zhu and Pei Li reported; Sumeet Chatterjee, Jason Neely, and David Goodman edited.) )/n
