Sina Weibo, widely known as China’s version of Twitter, is set to go public in the United States this week – after three weeks of sell-offs took their toll on technology stocks.
The microblogging subsidiary of Chinese internet behemoth Sina is scheduled to debut on the Nasdaq exchange on Thursday under the symbol “WB” in an initial public offering (IPO) expected to raise at least $US340 million ($A362.22 million).
Sina Weibo – launched in August 2009 to provide services akin to Twitter, which is banned in China – is a leading social media site in a country with the world’s largest population of internet users at 618 million.
But the estimated value of the IPO, filed by Weibo with the US Securities and Exchange Commission this month, was down on the sum of up to $US500 million indicated in March – reflecting discretion amid a gloomy market outlook after the Nasdaq index was down for more than three weeks.
The service itself is also facing questions about the size of its user base and rising competition from local rivals, such as Tencent’s mobile app WeChat.
“It’s much riskier for them to enter the market now than it was three weeks ago,” said Gregori Volokhine, a trader for Meeschaert Financial Services.
A total of 16 IPOs in Wall Street were planned for last week, the most in more than seven years, according to consulting firm Renaissance Capital.
But it said only 10 were completed as the market downturn continued, with six ending the week below their issue price due to a selloff in tech stocks as the Nasdaq suffered its biggest one-day fall since 2011.
Weibo set its price per share in a range of $US17-19, relatively cheap compared with other social networking companies.
The IPO is for 20 million shares, with an option for three million more if there is enough demand.
A unit of Chinese e-commerce giant Alibaba had agreed to buy three million shares in the listing, with an option to increase its stake to up to 30 per cent of the total capital of the company, up from its current 18 per cent.
Funds from Alibaba will be used to repay loans from Sina, which would still hold 56.9 per cent of the capital after the IPO, down from 79.9 per cent.
Weibo’s filing with US authorities omits some financial information usually included because it is an “emerging growth company” with more lenient reporting requirements for companies with less than $US1 billion in revenues.
But Volokhine said that on Wall Street, there is generally “a discount on Chinese companies listed there, because they don’t disclose their earnings and financial figures in a very transparent way”.
The number of Chinese IPOs in the US market fell to just two in 2012 from a peak of 39 in 2010, according to data from Dealogic, amid investor distrust after numerous accusations of fraud and other problems which led to plunging share prices and forced delistings.
Such problems were particularly acute in cases of “reverse mergers”, in which Chinese companies bought publicly traded but essentially defunct US companies as a backdoor route to a public listing.
Weibo claimed 129.1 million monthly active users as of December and 61.4 million average daily active users.
But research by an assistant professor at the Journalism and Media Studies Centre at the University of Hong Kong found that nine of 10 Weibo posts came from a core user group of just 10 million people, the South China Morning Post reported last week.
Despite Weibo’s popularity in China its ascent has hit speed bumps recently due to a social media crackdown by Beijing and the rise of WeChat.
WeChat is an instant messaging platform that allows users to send text, photos, videos and voice messages over mobile devices.
As of December, the total number of users of microblogging services in China had declined nine per cent from a year earlier to 281 million, the semi-official China Internet Network Information Centre said in January.
Of those who reduced their use of microblogging, 37 per cent switched to WeChat, it added.