Nasdaq-listed Weibo Corp.’s chairman and a Chinese state investor plan to take China’s answer to Twitter private, sources told Reuters, sending its shares as much as 50 per cent higher on Tuesday.
A deal could value Weibo at more than US$20-billion, facilitate shareholder Alibaba Group Holding Ltd.’s exit, and see Weibo eventually relist in China to capitalize on higher valuations, the sources said.
Chairman Charles Chao’s holding company New Wave, Weibo’s top stakeholder, is teaming up with a Shanghai-based state company to form a consortium for the deal, three sources said, without disclosing the state firm’s identity.
The consortium is looking to offer about US$90 to US$100 a share to take Weibo private, two of the sources said, representing a premium of 80 per cent to 100 per cent to the stock’s US$50 average price over the past month.
The group aims to finalize the deal this year, they said.
Reuters reported in February that Weibo had hired banks to work on a Hong Kong secondary listing in the final half of 2021. Sources said this is no longer the plan.
Shares in Weibo, which operates a platform similar to Twitter, surged more than 50 per cent in preopen trade after the Reuters report before gaining more than 10 per cent in early New York trade.
Mr. Chao did not respond to Reuters’ request for comment via Weibo parent company Sina.
WEIBO STATEMENT
Weibo issued a statement in which it said Mr. Chao and a state investor being in talks to take the company private was untrue.
Weibo cited Mr. Chao as saying he had no discussion with anyone regarding delisting the company.
Weibo and Alibaba did not respond to Reuters requests for further comment.
Yet three separate sources with knowledge of the matter told Reuters the plans stem from Beijing’s drive to have Alibaba and affiliate Ant divest their media holdings to rein in their sway over Chinese public opinion.
All the sources declined to be named because of confidentiality constraints.
Alibaba held 30 per cent of Weibo as of February, the latter’s annual report showed, which was worth US$3.7-billion as of Friday’s close.
REGULATORY CRACKDOWN
Beijing has looked to rein in Chinese billionaire Jack Ma’s Alibaba business empire by unleashing a series of investigations and new regulations since last year.
The crackdown followed Mr. Ma’s public criticism of regulators in a speech in October last year and has swept across China’s money-spinning internet sector in recent months.
E-commerce giant Alibaba has invested in nearly 30 media and entertainment firms, including Hong Kong’s flagship English-language newspaper South China Morning Post, Refinitiv data show.
Mr. Chao’s mooted deal would likely see it exit Weibo, two of the sources said.
The plan also reflects China’s efforts to tighten control over private media and internet businesses, sources added.
U.S.-listed Chinese firms also face heightened scrutiny and potentially stricter audit requirements from U.S. regulators, amid political tensions between Beijing and Washington.
A number of Chinese companies have already opted out of U.S. stock exchanges, by going private or returning to equity markets closer to home through second listings.
There were 16 announced delistings of U.S.-listed Chinese companies worth US$19-billion last year, Dealogic data showed, compared with just five such deals worth US$8-billion in 2019.
China’s cabinet said on Tuesday it would step up supervision of firms listed offshore, citing the need to improve regulation of cross-border data flows and security.
FIERCE COMPETITION
Weibo has grown at a fast clip since its launch in 2009 in a market where Twitter is blocked by the government. More than 500 million Chinese use Weibo to opine on everything from Korean soap operas to China’s latest political intrigue.
Alibaba acquired an 18-per-cent stake in Weibo in 2013 through a US$586-million investment as its first big move into selling advertisement on China’s social networks. It has since raised its stake.
Weibo, which went public on the Nasdaq in 2014, makes most of its revenue from online advertising.
That has worried investors as the growth rate of Chinese online advertising slows and Weibo has also lost ground amid competition with other tech giants such as ByteDance and Tencent .
The Beijing-based company advertising and marketing revenue fell 3 per cent last year to US$1.5-billion.
Its shares are up 33 per cent this year, after a fall of 12 per cent in 2020.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.