© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
February 24, 2014 7:12 am
Most of the world’s internet titans are snapping up mobile apps and start-ups, from WhatsApp to AutoNavi to Viber. Sina is going the opposite way. It has appointed banks for a partial spinout of its Weibo platform, a Twitter-like microblog for the Chinese market. Why exit as others mob the entrance?
Sina has given no details yet. It doesn’t need the cash. It held $1.2bn in net cash as of September – equivalent to a quarter of its current market capitalisation and nearly four times its 2012 cash burn (cash flow data for 2013 are not yet available). That leaves the desire for a higher valuation as the most likely motive. Alibaba bought an 18 per cent stake in Sina’s Weibo in April, stamping it with a value of $3.3bn. But the prices of big and growing mobile communications assets have risen merrily since then. Weibo had 60m daily active users in the third quarter of last year, and Barclays reckons it has 195m monthly users. The market values the monthly users at Facebook and Twitter at $142 and $126 apiece, respectively. Rakuten’s purchase of Viber rates its users at $90. Facebook just paid about $42 a subscriber for WhatsApp.
Using that last figure, Weibo would be worth $8.2bn (on what is clearly a very imprecise valuation method). Sina’s 71 per cent stake is then worth $5.8bn – against Sina’s total market capitalisation of $4.9bn. The logic of the valuations may be hard to understand. The urge to chase them is not.
This leaves two issues outstanding. First, what happens to the rest of Sina? Its other business is selling internet advertising. That is a slower-growth business, and Sina disclosures make it difficult to know how profitable it is. Second: where is Alibaba? It has an option to increase its stake to 30 per cent. If it does not do so before the float, investors may be spooked – just as their excitement about all things mobile is peaking.
Email the Lex team in confidence at firstname.lastname@example.org
Please don't cut articles from FT.com and redistribute by email or post to the web.