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Sina Weibo soars in debut, overcoming censorship concerns

The Weibo logo is seen at the NASDAQ MarketSite in Times Square in celebration of its initial public offering (IPO) on The NASDAQ Stock Mark
The Weibo logo is seen at the NASDAQ MarketSite in Times Square in celebration of its initial public offering (IPO) on The NASDAQ Stock Mark

By Alexei Oreskovic and Tanya Agrawal

SAN FRANCISCO (Reuters) - Shares of Weibo Corp rose as much as 41 percent in their U.S. debut on Thursday, sweeping aside concerns that censorship in China will hurt the growth of the country's Internet sector and broader worries about the outlook for tech-sector stocks.

Investors are watching the biggest debut of a Chinese Internet company in years, hoping for clues as to demand for the highly anticipated IPO of far larger e-commerce giant Alibaba Group Holding Ltd .

Sina Weibo's early gains came after the owner of a Chinese Twitter-like messaging service priced its shares at the very bottom of a target range of $17 to $19, and cut its offer to 16.8 million American Depositary Shares from 20 million.

The stock soared as much as 41 percent to $24.48 in early afternoon trading, valuing the company at about $4.7 billion.

That surge caught some investors off-guard because of its well-known susceptibility to unpredictable Chinese censorship and the uncertain outcome of intense domestic competition with the likes of Tencent Holdings Inc<0700.HK>.

"People had concerns that there's some competition over there and that engagement on Weibo may be challenged in the future, but I think Weibo is still a social media platform, that people still use it every day," said Henry Guo of JG Capital.

"I'm expecting the censorship and monitoring to continue. But I don't see any risk as far as Weibo's existence."

Weibo, in which Alibaba owns a stake, often prompts comparisons with Twitter Inc but its market value is a fraction of the San Francisco company's. At Wednesday's close, Twitter was valued at about $26 billion.

Weibo, whose name means "micro blog" in Chinese, has grown at breakneck speed in a country where Twitter is banned, but there's evidence that its user growth has slowed as China cracks down on criticism of the ruling Communist Party.

A rule that took effect in September imposes a prison sentence of up to three years for those who knowingly share false information online. That had a chilling effect on Weibo.

Research commissioned by Britain's The Telegraph found that posts fell as much as 70 percent after rule was announced.

And it's also battling intense domestic competition. People who once used sites such as Weibo's are now flocking to messaging apps such as Tencent Holdings Ltd's <0700.HK> WeChat.

Unlike Weibo, WeChat allows users to communicate in private circles of friends. The service leaped from 121 million global monthly active users at the end of September 2012 to 272 million in just a year.

Yet WeChat itself isn't immune to government censorship. Last month, authorities closed dozens of popular accounts, including those held by widely read columnists and investigative journalist Luo Changping.

A GOOD START

Sina Weibo's sterling debut could pave the way for its peers. Alibaba is expected to file as early as next week for a U.S. IPO that could raise as much as $15 billion. That would make it the biggest internet company IPO since Facebook Inc's $16 billion coming-out party in 2012.

U.S. IPOs raised more than $18 billion in the first three months of the year, making it the best quarter in more than a decade. Technology companies raised about $4 billion of the total, compared with $1 billion in the same period last year.

But investors may be having second thoughts as valuations -- particularly for tech and biotech companies - become stretched. The Nasdaq Composite index <.IXIC> has fallen about 6.5 percent since its March 6 high, and recorded its biggest one-day drop in two and a half years last week.

Sina Weibo's offering, whose lead underwriters were Goldman Sachs and Credit Suisse, raised $286 million, much of which will go to its parent. Weibo is controlled by Web portal company Sina Corp , whose stake falls to 56.9 percent from 77.

Alibaba, which paid $585.8 million for an 18 percent stake in the company last year, will increase its holding to 32 percent and will also appoint a director to the board.

(Reporting by Tanya Agrawal in Bangalore and Yimou Lee, Elzio Barreto and Denny Thomas in Hong Kong; Editing by Ted Kerr and John Pickering)

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