China’s Online Giants Head for IPOs in New York

Entertainment biz implications as China's equivalent of Twitter and biggest e-commerce hub head to market.

HONG KONG – China’s online giants Alibaba and Sina Weibo are both setting courses for share flotations on stock markets in the U.S.

Both companies have significant relations with the media and entertainment sectors.

Alibaba, an e-commerce behemoth with revenues bigger than Ebay and Amazon combined, has significant interests in online payment and cloud computing and has expanded into new areas such as mobile apps, mobile operating system and Internet TV. Last week the company announced the $800 million acquisition of HK-listed, Chinese film producer Chinavision. Yahoo! has a 24% stake in Alibaba, which it expects to reduce at the time of the IPO.

Sina Weibo is China’s leading micro-blogging service and is often described as China’s equivalent of Twitter. Twitter is banned in China, where government censors retain control of information that is posted on social media platforms.

“Alibaba Group has decided to commence the process of an initial public offering in the United States.  This will make us a more global company and enhance the company’s transparency, as well as allow the company to continue to pursue our long-term vision and ideals,” Alibaba said in a statement on Sunday.

The scale of the IPO is unclear, but analysts estimate that the group could be valued at over $140 billion and that the share sale could raise $15 billion.
That would dwarf the size of Weibo’s flotation, news of which also emerged over the weekend. In filings with the New York Stock Exchange, Sina Weibo’s parent the NASDAQ-listed Sina Corp. said that it would seek to raise $500 million. Other financial sources say that Weibo might raise $700 million and be valued at over $7 billion.

In April last year Alibaba paid $586 million for an 18% stake in Sina Weibo.
Sina said that it expects to retain majority control of Sina Weibo after flotation.

Sina Weibo has 129 million active monthly users, just over half of Twitter’s total, and says that 61 million are active daily users.

Sina Weibo earns four fifths of its revenues from advertising and is now diversifying income with growth from games and membership services. The unit is loss making, though net losses tumbled from $102 million in 2012 to $38 million in 2013.

Alibaba said the flotation would help it become a more global company. Its Google like mission statement is “to make it easy to do business anywhere.”

Sina Weibo said that it would use up to half of the proceeds of the share sale to repay Sina Corp, with the rest going to sales and marketing enhancements and staff incentives.

Sina Weibo, and other smaller rivals, has been a huge social phenomenon in China. “Media outlets use Weibo as a source of news and a distribution channel for their headline news. Government agencies and officials use Weibo as an official communication channel for disseminating timely information and gauging public opinion to improve public services,” the NYSE document said.

The four year old company’s upside lies in its potential to turn that huge audience into paying consumers. It is currently adding more gaming, value added and paid-for applications. But it is seeing its usefulness crimped by an increase in government censorship of social media that began last year. That in turn has opened the door for the fast growth of Weixin (aka WeChat), a mobile phone based phenomenon that works in a similar fashion to WhatsApp, and has been hugely successful at adding groups and other forms of functionality. WeChat is owned by Asia’s largest internet group Tencent.

In September last year Alibaba’s Taobao marketplace, which allows third parties to operate as virtual retailers, reached an anti-piracy deal with the Motion Picture Association.

Taobao agreed to work with the MPA on identification and removal of MPA member content, to require virtual shops to have a valid Chinese ‘publication license,’ and to punish recalcitrant offenders.

Taobao also sells movie tickets for 800 Chinese theaters and handles voucher sales for a further 1,000. Last year it pacted with leading private sector film studio Huayi Brothers Media to sell tickets for its theaters.