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How Twitter’s IPO affects Sina Weibo

twitter sina eyeSina (NASDAQ:SINA) investors are keeping a watchful eye on the news about Twitter‘s IPO. Despite the Chinese web giant’s more diverse portfolio of products and services, many market analysts believe the majority of Sina’s market cap lies in its Twitter-like Sina Weibo social network. Thinking that the clone will mirror the original, Twitter’s value is inherently tied to Sina’s.

On September 12, the day Twitter submitted the paperwork, Sina’s stock price shot to a 52-week high of almost $88 per share, and remains close to that now. It’s not the first time Twitter’s calculated worth has had an effect on Sina. Some analysts have used Twitter’s previous valuations as a benchmark to determine Weibo’s worth.

In the lead up to Facebook’s IPO in January 2012, Renren (NYSE:RENN) share prices unexpectedly shot up 50 percent. Whether using a Western counterpart’s IPO to justify higher prices is an appropriate method or not, we can expect history to repeat itself in 2013.

Comparing the numbers

Most analysts predict Twitter’s market cap will settle somewhere between $11 billion and $15 billion. Twitter hopes to raise $1 billion in its IPO. It posted $317 million in revenue and a $79 million net loss in 2012. Twitter has never made a profit, and Quartz estimates its average revenue per user is only one-third of Facebook’s. It has 218 million monthly active users, which Asia-based investment bank Nomura values at $15 each.

Sina currently has a $5.76 billion market cap. It raised $68 million when it was listed on the Nasdaq in 2000. Despite a 20 percent jump in revenue in the second quarter of this year, it recorded a net loss $11.5 million compared to $33.2 million profit one year earlier. That’s most likely due to spending on non-Weibo products and services. Sina Weibo has 54 million daily active users, which Nomura values at $7 each.

Twitter’s IPO is expected sometime in November, although the date could be delayed due the current US government shutdown. Back in April, rumors emerged that Sina Weibo might also get its own spin-off IPO.

(Editing by Steven Millward)


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