The technology IPO bandwagon rumbles on this Thursday with the latest offering on the NASDAQ, this time from China, and there seems certainly a lot less fanfare surrounding this particular share issue than there was a few weeks ago when Candy Crush creator King Digital went to market.
This may be down to the fact that King is now trading well below its IPO launch price.
You’d be forgiven for not having heard of the latest in this long line of tech IPO’s but this one could be significant in the context of the upcoming Alibaba IPO, which could see a prospectus as soon as next week.
Sina Weibo, more commonly known as the Chinese version of Twitter is due to launch on Thursday, but probably as a result of the recent turmoil on US markets, is now only looking to raise $340m as opposed to the initial $500m expected just over a month ago, a large part of which could go to pay off debt to its holding company Sina.
Weibo has set its IPO price between $17 and $19, for 20m shares, much lower than other social media companies, perhaps reflecting much more realistic expectations of future revenue streams.
The key challenge facing Weibo is one that Twitter is already all too familiar with and that is one of monetising and expanding their user base, with the use of adverts in their user’s timelines, but they are at least being more realistic about the valuation relative to their previous year’s sales of about 18 times, relative to Twitter which is trading at 39 times earnings.
The company is looking at a valuation of around $3.8bn, compared to Twitter which has a market capitalisation of $25.8bn, which seems quite a large gap, but could also reflect the unique problems Weibo has in the context of its relationship with Chinese authorities.
The site has been losing followers hand over fist after Chinese authorities clamped down on certain posts in a censorious clamp down on what they deemed inappropriate posts.
Weibo claims it has in the region of 144m active users in a month; however it is hard to see how the company can grow its user base with any degree of certainty if Chinese authorities can remove posts, or delete accounts on a political whim.
One thing Weibo does have in its favour is its relationship with Alibaba, which carries it on its platform, and this could well give it a lift when the Alibaba IPO launches in the coming weeks, particularly after figures released this week by a Yahoo filing, showed that Alibaba’s annual income doubled in Q1, while revenues jumped by two thirds to $3.1bn.
That is likely to be one of many considerations when investors decide whether Weibo is worth a punt when it starts trading later on Thursday.
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