Weibo - China's version of Twitter - is going private. Weibo's chairperson, Charles Chao, said he and a Chinese state investor have agreed to acquire the stocks of the publicly traded company.
The announcement sent the company's stock up by more than 50% to $60.23 per share. The gains later settled and the stock closed at $57.74 per share.
Sources said the deal could value Weibo at more than $20 billion. The same source said Chao may decide to relist the company in China to capitalize on higher valuations.
Three separate sources told Reuters that Chao's holding company New Wave - Weibo's largest shareholder - had struck a deal with a Shanghai-based state company. The two would form a consortium for the transactions, the sources said. The name of the state company was not disclosed.
Sources said the consortium plans to make a take-private offer of about $90 to $100 per share. The price represents an 80% to 100% premium to the stock's average trading price over the past 30 days. Sources said the consortium is aiming to finalize the deal within the year.
Weibo issued an official statement later Wednesday, denying that Chao had struck a deal with a state investor. The company said it was unaware of any such discussions of taking it private.
Separate sources said the announcement may have stemmed from the government's wider plan to force Alibaba Group - one of Weibo's largest shareholders - to divest its media holdings to reduce its hold over the sector. In February, Alibaba said it held a 30% stake in Weibo. Its stake in the company is worth around $3.7 billion as of last week's close.
Alibaba acquired an 18% stake in the social media company in 2013 for $586 million. The company later raised its stake after Weibo went public on the Nasdaq in 2014.
Chinese regulators have been looking to rein in Alibaba's control over the media and consequently its sway on public opinion. To date, the company owns major stakes in nearly 30 media and entertainment companies.
