Weibo Owner Sina Corp Expected To Go Private Before Launching Secondary Listing

Sina Corp, the owner of China's Twitter-like social media platform Weibo, has reportedly received a buyout offer from a company that is being led by its own chairman and chief executive, Charles Chao. If the publicly listed company does choose to take the offer, its American depository shares (ADS) will reportedly be pulled rom the NASDAQ.

In its filing submitted on Monday, Sina Corp disclosed that it had received the offer from New Wave MMXV Ltd. The company, which is based in the British Virgin Islands and is majority controlled by Chao, reportedly offered to buy Sina Corp shares that it doesn't already own at $41 per share in cash.

The price New Wave is offering represents a 20 percent premium over the Sina Corp's average closing price in the U.S. over the last 30 days. Following the news of the takeover offer, the company's shares surged by a further 10.55 percent on Monday before closing at $40.54 per share.

Sina Corp has a market capitalization of about $2.65 billion. It owns a 45 percent stake in Weibo, which has a market capitalization of around $9 billion. Based on Weibo's valuation, Sina Corp's stake is worth around $4 billion, which means that it is significantly undervalued in the capital markets.

The media company's core traditional news services have significantly declined over the years, mostly due to intense competition from rivals such as Jinri Toutiao and NetEase. Since then, it has mainly been relying on Weibo as its main source of growth. For its first quarter this year, the company reported revenues of around $435.1 million, an 8 percent year-on-year decline. Its advertising revenue for the period fell by more than 20 percent to $310 million, which it says was mainly caused by the reduced demand due to the coronavirus pandemic.

Analysts have pointed out that the buyout deal may be the company's way of reducing its risk and exposure to the escalating tensions between China and the United States. Several other Chinese firms have considered the strategy of going private, to exit from foreign capital markets, which it will then follow up with a secondary listing at home.

As previously mentioned, Sina Corp is significantly undervalued on the U.S. market. By going private and hedging against uncertainties in the U.S., the company can likely get a better deal if it chooses to have just one listing in China. Apart from boosting its valuation, the company can also raise new capital that can go toward its further development.