Bloomberg News

Weibo IPO Prospects Lift Sina as SouFun Plunges: China Overnight

February 24, 2014

Sina Corp. (SINA:US), owner of China’s biggest Twitter-like service, gained in New York on speculation its microblogging unit will sell shares. Property stocks slumped after data showed a slowdown in home price growth.

Sina, whose Weibo service is the country’s most popular microblogging outlet, with 60.2 million daily users, rose to the highest in a month. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. dropped 0.7 percent to 101.37 yesterday, the most in two weeks. E-House China Holdings Ltd. (EJ:US), a property brokerage, tumbled 9.7 percent while SouFun Holdings Ltd. (SFUN:US) sank for a third day. Sohu.com Inc. (SOHU:US) fell after Goldman Sachs Group Inc. cut its recommendation on the stock.

Shanghai-based Sina has selected banks for an initial public offering of Sina Weibo that may raise $500 million, according to two people with knowledge of the matter. The company reported (SINA:US) after the close fourth-quarter adjusted earnings of 47 cents per share, beating the mean estimate of 14 analysts surveyed by Bloomberg. Government data showed yesterday that new home price growth in China’s first-tier cities slowed in January.

“The Weibo IPO news is positive for Sina’s stock price because it could boost Sina’s valuation if the IPO goes well,” Echo He, a New York-based senior analyst at Maxim Group LLC, said by phone. “We expect Sina to report strong fourth-quarter results as it added advertising clients and ad inventory. It should also provide strong guidance.”

Weibo Listing

The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., dropped 1.2 percent to $35.31, the biggest retreat since Feb. 5. The Standard & Poor’s 500 Index gained 0.6 percent as health-care providers jumped on a smaller-than-forecast cut in Medicare rates and EBay Inc. advanced as Carl Icahn urged the spin-off of PayPal.

Sina’s shares climbed 4.3 percent to $76.08 in New York, trimming its decline this year to 9.7 percent. The American depositary receipts surged 68 percent last year.

Credit Suisse Group AG and Goldman Sachs are working on the planned U.S. listing of Sina Weibo, said the people, who asked not to be identified because the information is private. The share sale may start in the second half, one of the people said. Liu Qi, a Beijing-based spokesman for Sina, declined to comment on whether the company hired banks for an IPO in the U.S.

The planned offering comes as Sina Weibo faces competition from Tencent Holdings Ltd.’s WeChat messaging application. Alibaba Group Holding Ltd., China’s biggest e-commerce company, agreed in April to buy an 18 percent stake in Sina Weibo for $586 million. The Weibo business came close to breaking even in the third quarter as its advertising revenue more than doubled from a year earlier, Sina said Nov. 12.

After Market

Sina forecast (SINA:US) first-quarter adjusted sales of between $162 million and $167 million, the company said after the close of U.S. markets yesterday. That compares with the average analysts’ estimates of $163.7 million, according to data compiled by Bloomberg. Shares fell 5 percent at 4:50 p.m. in New York.

ADRs of E-House, based in Shanghai, sank to $12.59, the biggest drop since December 2012. SouFun, China’s biggest real-estate information website, slid 6.2 percent to $75.01, dropping the most in two weeks.

Home prices in the capital city of Beijing and the southern business hub of Shenzhen both rose 0.4 percent from a month earlier, the National Bureau of Statistics said in a statement yesterday, the slowest pace since October 2012.

Industrial Bank Co., based in Fuzhou, China, temporarily tightened financing for real-estate developers until it prepares a new set of credit policies, according to a stock exchange statement. It also suspended granting new credit to some developers and halted mezzanine financing until new rules are released, by the end of March, it said.

Developers Slump

Shares of property developers fell yesterday in China on concern that the curb may further limit their funding sources and push up borrowing costs as Chinese policy makers crack down on shadow banking.

Xinyuan Real Estate Co. (XIN:US), based in Beijing, sank 2.8 percent to $4.86 in New York, the largest retreat in three weeks.

Sohu’s shares slipped 1.4 percent to $74.07, extending a slump into a second day. Fei Fang, a Hong Kong-based analyst at Goldman Sachs, cut (SOHU:US) Sohu’s stock rating to neutral and reduced a price target by 18 percent to $80 yesterday.

The Shanghai Composite Index fell 1.8 percent to 2,076.69, the biggest drop in seven weeks, while the Hang Seng China Enterprises Index (HSCEI) in Hong Kong slid 1.4 percent to 9,797.86, the lowest in two weeks.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • SINA
    (SINA Corp/China)
    • $43.62 USD
    • -1.66
    • -3.81%
  • EJ
    (E-House China Holdings Ltd)
    • $9.69 USD
    • 0.24
    • 2.48%
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