The geopolitical scene has changed completely over the past 20 years but Sina Corp’s core business hasn’t. Such was the domestic media’s verdict on the fluctuating fortunes of the company that paved the way for other Chinese internet firms to go public in the US – but which now joins the exodus from American bourses.
At the end of September, Sina’s board accepted a $2.59 billion privatisation offer from its majority shareholder, BVI-registered New Wave (for our first report on the sale, see WiC504). The following day, a second Chinese tech company, Sogou also announced that its board had approved a $3.5 billion privatisation offer from a group of companies owned by Tencent (Sogou operates China’s second biggest search engine and only debuted in New York in late 2017; see WiC389).
Sina’s departure from Nasdaq is particularly symbolic, given that it pioneered the variable interest entity (VIE) structure. These ownership arrangements allowed Chinese tech companies to access much-need foreign capital while staying in line with domestic laws barring such investment in sensitive areas like tech.
Sina listed in April 2000 and was followed in quick succession by two other internet portals, NetEase and Sohu.com. The three were the country’s tech stars long before the BAT troika: Baidu, Alibaba and Tencent. However, the domestic media believes that Sina “lost its advantage during the mobile internet era” and suffered from “a gradually diminished aura”, as Jiemian.com puts it.
Huxiu.com said that “Sina is still essentially reliant on the same revenue stream that it was 20 years ago: advertising”, while TMT Post added that the delisting should help Sina revamp its strategy away from the public eye. That still “doesn’t get round the management’s lack of imagination,” it warned.
Assessments on social media were harsher. One well-liked comment compared Sina to Kodak as a company “eliminated by changing times”. Another proffered that “it’s impossible to keep hold of your first pot of gold if you don’t carry on investing or innovating”.
The company itself begs to differ. One revenue stream that distinguishes Sina in 2020 from Sina 20 years earlier is its income from its Twitter-like service Weibo, which was launched in 2009 and listed separately on Nasdaq in 2014.
Sina owns 46% of the micro-blogging company, or 58% when preference shares are taken into account (Alibaba has a 30% stake). Weibo has been “resilient in maintaining its user base and unique marketing proposition,” says Huatai Securities, although it acknowledges that Weibo faces a multitude of threats from other platforms like WeChat, Toutiao, Douyin and Kuaishou.
Weibo accounts for 80% of Sina’s revenues and in the second quarter, its net revenues fell 3% to $387 million. However, analysts point out that sales were actually up 9% on a constant currency basis, helped by ad spending from consumer goods firms and car companies. The big drop-off came from SMEs, which have been badly hit by the pandemic (ad revenue from this segment was down 21% year-on-year).
Sina is also diversifying into new ventures like Oasis, which is positioned as a Chinese Instagram; Moments, a video and picture-sharing platform, launched last September.
Weibo’s share price has reacted positively to its parent’s privatisation, rising about 40% since the beginning of June. Sina itself had previously traded at a holding company discount to its Weibo unit, although that had narrowed before the take-private offer.
Sina may now choose to join NetEase in seeking a listing in Hong Kong or a mainland Chinese bourse.
Today, companies like Sina have found themselves in the crosshairs of the Sino-US tech war. But Sina isn’t a stranger to share price volatility. Back in 2001, the internet portal’s shares sunk from an IPO price of $17 to just $0.95 after the dotcom bubble burst and when NetEase was accused of accounting fraud.
The bounceback was spectacular – within two years Sina’s shares had topped $40.
Indeed, Sina chairman and CEO Charles Chao – who is leading the privatisation effort – is a veteran of the sector. No doubt he’ll be hoping that his company can pull off the same kind of turnaround once again.
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