Weibo Gets Confidence Vote From Digital Sky DST投资消息或提振新浪短期前景

By newsdoug on December 27, 2011

Sina (Nasdaq: SINA), China’s leading web portal whose shares have been battered lately, has received a rare piece of good news in the form of a potential major new investment for its controversial Twitter-like Weibo service from heavy-hitter Digital Sky Technologies (DST). (English article; Chinese article) There’s so much to say on this subject that I’m not sure where to start, so perhaps the best place would be with the actual news. Media are reporting that DST, an early investor in Facebook and which has taken a recent liking to the Chinese Internet, is in talks to pump around $200 million into Weibo via a convertible bond exercisable at $65 per Sina share. That price would have been a bargain just 7 months ago, when Sina shares were trading as high as $140. But anyone who follows this company knows its stock has plummeted in recent months and now trades at around $55, following a string of big write-offs for its e-commerce and real estate services investments (previous post), and amid a broader confidence crisis towards US-listed China stocks after a recent series of accounting scandals. Further clouding the picture was Beijing’s announcement this month that all users of microblogging services would have to register using their real names, a move with strongly negative implications for Sina’s wildly popular Weibo service that boasts more than 250 million users and was one of the company’s few bright spots. (previous post) Clearly this new investment by DST will come as a vote of confidence in Weibo, in Sina’s sputtering campaign to monetize the recently spun-off service for a potential future IPO. But company watchers should also note that DST is hedging its bets by buying a convertible bond rather than making a direct investment. Furthermore, DST is hardly the best barometer for good China Internet investments, as it has made a wide range of such investments this year, often at overinflated valuations. DST’s recent string of China purchases include stakes in e-commerce firm 360Buy, also known as Jingdong Mall, and a recent purchase of a stake in Alibaba, China’s e-commerce leader. The company was also interested in previously buying a stake in Kaixin, one of China’s leading social networking services, and itself is part owned by leading Chinese Internet company Tencent (HKEx: 700) All that said, this latest investment may help to boost Sina and Weibo’s prospects in the very short term, but the longer-term picture for both still looks quite cloudy.

Bottom line: A potential $200 million investment in Sina’s Weibo microblogging service by DST should help to boost the company in the short term as it tries to shore up its battered image.

Enjoy this blog? Please spread the word :)