Chinese Twitter Weibo Set to Go Public

chinese twitter weiboChinese Twitter Weibo set to go public. In what could be the biggest social media IPO of 2014, Weibo, often called the Twitter of China, filed paperwork to go public in the U.S. In an effort to raise $500, the Chinese  micro-blogger filed a preliminary prospectus for an initial public offering (IPO) with the SEC on Friday. Weibo, which is owned by Sina Corp. (Nasdaq:SINA) follows other Chinese internet giants, such as Baidu into the lucrative U.S. market.

In light of the sale of mobile messaging phenom WhatsApp, for a whopping $16 billion to Facebook, expect 2014 to be full of hot technology companies going public. The Chinese Twitter Weibo IPO may be one the biggest of the year. Weibo is targeting a valuation of around $8 billion. Currently analysts see Weibo at a $3-6 billion valuation, although some do see it in the $7-8 billion range. Regardless the multi-billion market valuation will garner attention in the U.S. markets. In contrast, Twitter is valued around $30.4 billion.

Weibo currently has 129 million monthly users posting around 2.8 billion messages per month. Weibo is to China, literally, the American equivalent of the “water cooler” in the United States. Weibo is expected to launch its IPO in the second quarter, under the direction of Goldman Sachs and Credit Suisse. Chinese internet giant Alibaba purchased 18 percent of Weibo’s parent company last year for $586 million. With this injection of capital from Alibaba, their shares rose from $55 to $73.

Both Alibaba and Weibo have often copied, and sometimes even improved upon Web innovations first developed in the United States or in the West. In essence, they could pose challenges for American Web giants like Twitter. Alibaba has now passed Amazon as the world largest e-commerce company. Its market place is home to nearly 6 million Chinese merchants hawking their goods online.

With Chinese Twitter Weibo set to go public, questions and concerns always come to light when it comes to free speech in China. There are reports that China tries to limit free speech on the micro-blog platform by erasing images, censoring accounts or just completely shutting accounts down. In fact, Weibo listed government censorship as a risk factor in its preliminary prospective filed with the SEC. Weibo can also expect stiff competition from messenger services like WhatsApp and WeChat, and Weibo certainly does not possess Twitter’s global appeal.

U.S. investors have long been drawn to the stock of large Chinese companies. Many hope to profit from the success of the world’s fasting growing economy. Interestingly, Chinese e-commerce giant Alibaba Group, who owns 18 percent of Weibo, is expected to go public later this year and be one of the largest initial public offerings ever made. Alibaba’s IPO is expected to raise $16 billion , nearly the size of Facebook’s public offering.

Weibo reported its first net profit last quarter in which it reported at $3 million. It was an increase of 163 percent on advertising revenue of $56 million. Improving on that number will be a huge factor for this up and coming social media giant. With this Chinese Twitter Weibo set to go public, this may be the beginning of a long list of Chinese e-commerce companies seeking capital in the United States.

By  John J. Poltonowicz

Money Morning
Wall Street Journal

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