Sina, New York's first Chinese internet stock, prepares to depart
Weibo parent pioneered workaround copied by Alibaba and Tencent
/NOVOSTIVL/ Sina, the first Chinese internet company listed in the U.S., will ask shareholders on Wednesday for approval to join an exodus from New York amid rising tensions between Washington and Beijing.
A group led by Charles Chao, the company's chairman and CEO, is offering stockholders $43.30 in cash for each share they own, valuing the company at $2.59 billion. Shares in Sina, the parent company of the Weibo social media network, closed at $42.53 on the Nasdaq exchange on Monday.
Chao's proposal, backed by Sina's board, needs support from at least two-thirds of shareholder votes, but Chao alone controls 61% of the company's voting rights.
At least 14 New York-listed Chinese companies have received or accepted bids from investors seeking to take them private this year, the most since 2015. These include online marketplace 58.com and search engine Sogou.
Other major Chinese internet companies whose shares trade in New York, including JD.com and NetEase, have held secondary listings this year in Hong Kong. These could become their primary listings, after President Donald Trump signed a bill last week that would force Chinese companies off of American exchanges within three years unless U.S. regulators get access to their audit records.
The delisting of Sina would be milestone in the development of China's internet industry. The Beijing-based company carved a lucrative path to New York for its peers and laid the foundation for digital content creation and distribution in China.
China has long restricted foreign investment in its internet sector, among other industries. To get around this and reach the Nasdaq in 2000, Sina created what is known as a "variable interest entity."
Investors bought shares in its Cayman Islands-registered holding company, which then contracted with a China-based affiliate licensed to offer internet services. This approach, which was never clearly endorsed or rejected by the Chinese government, became standard practice for later New York arrivals, including Alibaba Group Holding, Baidu and Pinduoduo.
Founded in 1998 by a group of software engineers, Sina started out as an internet portal after the merger of two rivals. Offering real-time news and sports information, Sina.com quickly became the world's busiest Chinese-language website.
With the launch of Weibo, a Twitter-like microblogging service, in 2009, Sina drew leading celebrities, scholars and journalists, who in turn attracted millions of followers.
Under looser internet censorship at the time, Weibo created a vibrant discussion platform for ordinary people to express their opinions on public matters, discuss current affairs and even expose social injustice.
Sina listed Weibo in 2014 but the offspring has since overshadowed its parent. As of Monday, Weibo had a market capitalization of $10.36 billion, dwarfing Sina's $2.54 billion. Sina still owns about 44.9% of Weibo, which accounted for more than 70% of Sina's revenue in the first half of 2020. Sina is exploring new lines of business, including online financial services.
But neither online finance nor social media have escaped Beijing's tightening grip. Under heightened government scrutiny, many Weibo accounts have been suspended or deleted as censors scrub posts deemed to be rumors or politically sensitive.
Weibo and Sina are also fighting to hang on to advertisers in the face of fierce competition from short-video and livestreaming platforms. Sina reported a net loss of $25.4 million in the April-June quarter, with advertising revenue falling 10%.
"Their advertising businesses have been destroyed by ByteDance and Kuaishou," said Carlton Lai, an analyst with Daiwa Capital Markets, referring to the owners China's most popular short-video platforms.
Shares of Weibo and Sina are both down by more than half from their highs in 2018. Many investment banks have dropped coverage of the pair due to their slowing growth.
Oasis Management, a Hong Kong-based activist investor group, last Thursday disclosed in a U.S. Securities and Exchange Commission filing that it had taken a 5.2% stake in Sina.