How Twitter’s IPO affects Sina Weibo; Twitter’s 218 million monthly active users is valued at $15 each; Sina Weibo has 54 million daily active users valued at $7 each

How Twitter’s IPO affects Sina Weibo

October 4, 2013

by Paul Bischoff

twitter-sina-eye

Sina (NASDAQ:SINA) investors are keeping a watchful eye on the news about Twitter‘s IPO. Despite the Chinese web giant’s more diverse portfolio of products and services, many market analysts believe the majority of Sina’s market cap lies in its Twitter-like Sina Weibo social network. Thinking that the clone will mirror the original, Twitter’s value is inherently tied to Sina’s.On September 12, the day Twitter submitted the paperwork, Sina’s stock price shot to a 52-week high of almost $88 per share, and remains close to that now. It’s not the first time Twitter’s calculated worth has had an effect on Sina. Some analysts have used Twitter’s previous valuations as a benchmark to determine Weibo’s worth.

In the lead up to Facebook’s IPO in January 2012, Renren (NYSE:RENN) share prices unexpectedly shot up 50 percent. Whether using a Western counterpart’s IPO to justify higher prices is an appropriate method or not, we can expect history to repeat itself in 2013.

Comparing the numbers

Most analysts predict Twitter’s market cap will settle somewhere between $11 billion and $15 billion. Twitter hopes to raise $1 billion in its IPO. It posted $317 million in revenue and a $79 million net loss in 2012. Twitter has never made a profit, and Quartz estimates its average revenue per user is only one-third of Facebook’s. It has 218 million monthly active users, which Asia-based investment bank Nomura values at $15 each.

Sina currently has a $5.76 billion market cap. It raised $68 million when it was listed on the Nasdaq in 2000. Despite a 20 percent jump in revenue in the second quarter of this year, it recorded a net loss $11.5 million compared to $33.2 million profit one year earlier. That’s most likely due to spending on non-Weibo products and services. Sina Weibo has 54 million daily active users, which Nomura values at $7 each.

Twitter’s IPO is expected sometime in November, although the date could be delayed due the current US government shutdown. Back in April, rumors emerged that Sina Weibo might also get its own spin-off IPO.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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