Weibo’s bargain basement IPO: bad numbers, censorship and missed chances

If I had a sheep for every time someone’s described microblogging service Sina Weibo as China’s answer to Twitter, I’d need a farm the size of Belgium to keep them on. It is, admittedly, a fairly apt analogy. There are, after all, a lot of features that the two services share. In at least one important respect though the two are radically different.

You see, while Twitter pretty much had a dream IPO (although its shares have performed less spectacularly since) with oversubscribed shares and a US$31-billion valuation, Sina Weibo’s has a distinctly bargain basement feel to it.

How so? Well let’s take a look at some of the numbers:

Valuation: US$3.56-billion

While Sina Weibo never seemed to be going for the kind of frenzied IPO its Western counterpart, a US$3.46-billion valuation is fair bit lower than it was hoping for.

US$285.6-million raised in share sales

If you want a clue as to how much higher a valuation the microblogging service was expecting, it’s not a bad idea to look at how much money it’s managed to raise versus how much it was hoping to. The company was hoping to raise US$500-million by selling 20-million American Depositary Shares (ADSs) at between US$17 and US$19 per share. Instead, it managed to sell 16.8-million at US$17 a piece.

Compare that with Alibaba, the ecommerce giant that recently bought an 18% stake in Weibo. Its widely anticipated IPO — expected to be announced on Monday — could be worth even more than Facebook’s, which valued the social network at US$6-billion.

Given such lackluster demand it hardly seems likely that the stock will blow up once it hits the Nasdaq later today, but what could possibly lie behind the hesitation? Sure, Sina Weibo’s 143.8 million-strong active user-base is a fraction of its 600-million registered users, but there have to be other factors right? Right.

Censorship

When Twitter went public, the only real questions investors were posing were around its ability to make money. Sina Weibo’s faced those same struggles in a country where the government can pretty much impose strict censorship at will.

You’re always going to battle to sell Western investors on a social network that can’t always guarantee that its users will be able to be fully social on it. Sina Weibo was compelled to warn investors as much in its IPO filing:

“Although our active user base has increased over the past several years, regulation and censorship of information disseminated over the Internet in China may adversely affect our user experience and reduce users’ engagement and activities on our platform as well as adversely affect our ability to attract new users to our platform. Any and all of these adverse impacts may ultimately materially and adversely affect our business and result of operations.”

Sina Weibo’s been particularly hard hit by state censorship, something that’s most likely down to the fact that its users took it as point of protest on a number of occasions.

Missed opportunities

You can’t however blame censorship entirely. Other Chinese companies subject to the whims of the Great Firewall, including search giant Baidu, continue to perform solidly on US stock exchanges despite the looming threat of content being blocked.

In 2011, pundits were betting on a big battle between Sina Weibo and Twitter, with the latter rumored to be readying an English-language version, which would allow it to break out of China.

Trouble is, it dithered on that front, with the English-language version only came in late 2013. By that time, its arch-rival Tencent was aggressively pushing WeChat and adding features that took it beyond instant messaging and deep into Sina Weibo’s territory.

You can’t help but wonder what would’ve happened therefore if Sina Weibo had been built in a country with less stringent regulations and taken more of its opportunities.