Weibo's done half the job that Twitter has in turning its microblogging users into earnings. That may explain why the Chinese company is seeking as little as half the valuation in its initial public offering.
Weibo, owned by Sina Corp. and Alibaba Group Holding Ltd., plans to offer 20 million American depositary shares for $17 to $19 apiece, according to an April 4 regulatory filing. The deal is scheduled to be priced in New York today, according to data compiled by Bloomberg.
The Beijing-based microblogging unit is marketing its IPO at a valuation as low as 18 times last year’s sales, compared with a stock price equal to about 39 times for Twitter. Weibo was taking in $1.46 in revenue per monthly active user at the end of last year, compared with $2.76 at Twitter, data compiled by Bloomberg show. Weibo is seeking a valuation between about $3.5 billion and $3.9 billion.
“The Twitter platform lends itself well to brand advertising, which is why the monetization of Twitter is stronger than Weibo’s,” Neil Doshi, an analyst at CRT Capital Group, which has the equivalent of a hold rating on Twitter, said by phone yesterday from San Francisco. “That explains the valuation gap between the two.”
The Bloomberg index of the most-traded Chinese stocks in the U.S. slumped 1.5 percent, the most in a month, to 98.67 yesterday. The iShares China Large-Cap, the largest Chinese exchange-traded fund in the U.S., sank 2.5 percent to $35.29. Sina, which has a 78 percent stake in Weibo, rose 1.3 percent to $53.09.
The Shanghai Composite Index rose 0.2 percent today, while the Hang Seng China Enterprises Index rose 0.1 percent.
Weibo is proceeding with its IPO plan amid a selloff in global technology companies that has pushed the Nasdaq Composite Index down the most since 2011 on April 10. Concern is also mounting that China’s expansion is faltering. Data yesterday showed that the country’s broadest measure of new credit fell 19 percent in March from a year ago while the money supply increased at the slowest pace on record.
Liu Qi, a press official at Sina, didn’t answer a call seeking comment on the Weibo IPO. Sina’s investor relations department didn’t respond to an e-mail requesting comment yesterday.
Weibo had 129.1 million monthly active users at the end of 2013, compared with more than 240 million for Twitter, filings from the two companies show.
At the high end of Weibo’s marketed range, the company is seeking a valuation of $3.9 billion, or about 21 times last year’s sales of $188.3 million. The multiple would be 18 times if it were to price at the low end of the range. San Francisco- based Twitter, which had a market capitalization of $25.8 billion, or 39 times sales, hasn’t yet posted a profit. The stock has surged 75 percent since its November IPO.
“Either Weibo is incredibly undervalued, which we think it is, or Twitter is ridiculously overvalued because there’s no metric or risk that applies to Weibo that does not apply to Twitter,” Sam Hamadeh, chief executive officer of PrivCo Media LLC, which compiles and analyzes data on closely-held companies, said in a phone interview from New York. “It’s a terrific situation for public investors.”
At its proposed range, Weibo would raise as much as $380 million, some of which it plans to use to pay debt owed to Sina, the corporate filing showed. The company plans to list on the Nasdaq Stock Market under the symbol WB. It will begin trading April 17.
Goldman Sachs Group Inc. and Credit Suisse Group AG are managing Weibo’s offering. The deal would be the third by a Chinese company in New York this year after professional- education services provider Tarena International Inc. and iKang Healthcare Group Inc., both of which have dropped below their IPO prices.
In the first quarter, China-based companies announced more than $2.5 billion of U.S. IPOs, the most since the fourth quarter of 2007, data compiled by Bloomberg show. That figure doesn’t include the planned offering by Alibaba, which bankers estimate could be the largest IPO in the U.S. in at least two years.