Weibo IPO: ‘China’s Twitter’ Is Market-Bound

The messaging platform should see some traction in the lively U.S. IPO market

   

Weibo, which operates a platform similar to Twitter’s (TWTR), has filed for an initial public offering. And the Weibo IPO is helping majority owner Sina (SINA) on a day where Sina also received a boost from news of another upcoming IPO: Alibaba.

Launched in August 2009, Sina Weibo has turned into one of Asia’s top Internet properties. The platform simply provides a simple way to create 140-character messages, replete with photos and videos.

The service is offered in 190 countries, though the lion’s share of the 129.1 million monthly active users (for comparison’s sake, Twitter has 241 million MAUs) are based in China. And Weibo is deeply entrenched in the mobile arena, with more than 70% of its MAUs using the mobile version.

Sina Weibo only really got the monetization gears going in 2012, but the results have been impressive so far. From 2012 to 2013, revenues have soared from $65.9 million to $188.3 million, and the red ink has dried up from $102.5 million to $38.1 million.

That momentum should continue — at least in the short run — if its user growth is any indication. Sina Weibo saw MAUs soar by 34% and daily active users jump by 36% (to 61.4 million). Again, for comparison’s sake, Twitter’s MAUs grew roughly 30% year-over-year, according to its most recently reported numbers … though TWTR was dogged by the fact that sequentially, its 241 million MAUs in Q4 2013 only represented 3.8% growth.

The company also appears to have more upside in terms of monetization, seeing as how only about 22% of revenues come from mobile; Weibo didn’t even start selling mobile ads until Q2 2013.

Sina Weibo is also likely to get a boost from Alibaba, which invested $585.8 million in the company last year. Alibaba has been feeding traffic to the service and has been working on ways to improve revenues, such as through mobile payments. Alibaba also plans to increase its equity state from 18% to 30% by the time Sina Weibo pulls off its IPO.

Weibo does have some risk factors. For instance:

  • Traffic has been concentrated in the tier-1 cities like Beijing, Shanghai, Guangzhou and Shenzhen. To keep up growth, the company will need to get traction in smaller cities, which could prove much tougher.
  • The other issue is the rising competition. In the Chinese market alone, Weibo must fight against Sohu.com (SOHU), NetEase (NTES) and Tencent (TCEHY). As the company expands outside China, it will have even more competitionincluding Facebook’s (FB) WhatsApp, Line, Kakao Talk and Twitter.
  • Then there is the wildcard of China’s governmental policies regarding speech. If Weibo publishes something that violates the law, its users (and the service itself) could face penalties and blockages. Plus, users might be subject to arrest. A spurt of those could certainly chill user growth.

Still, considering Weibo’s ability to navigate the current waters, not to mention the benefits from launching amid a boisterous U.S. IPO market, the timing still looks pretty good.

And the Weibo IPO itself should look good, too.

Weibo IPO Details

  • Expected Offering Date: Sometime in April.
  • Ticker: Weibo has yet to disclose a ticker or exchange.
  • Lead Underwriters: Goldman Sachs (GS) and Credit Suisse (CS).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/sina-weibo-ipo/.

©2014 InvestorPlace Media, LLC

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