Sina Weibo shares jump more than 25% after IPO

Shares of Sina Weibo, China's answer to Twitter, jumped more than 25 percent in initial trade Thursday, after a disappointing initial public offering on the US Nasdaq exchange.

The offering on Wednesday was undersubscribed as Weibo's parent, the Chinese Internet giant Sina Corp, ran into a market jittery over both tech and Chinese company shares.

Weibo sought to raise as much as $380 million by selling 20 million shares for as much as $19 each, but only saw demand through underwriters for 16.8 million shares at the low end of the offer, $17. That only brought the company $287 million.

Retail investors had more confidence, however, sending the shares soaring in early trade, topping $21 and valuing it at nearly $4.3 billion.

Weibo, launched in August 2009, is China's largest social media service with 144 million active monthly users. It is most often compared to Twitter, but allows more content and functionality that lets it overlap with Facebook as well.

It has yet to make a profit, losing $38 million last year on revenues of $188 million, and another $47 million in the first quarter of this year, though revenues jumped to nearly $68 million for the three months.

Sina chief executive Charles Chao told AFP that Weibo is rapidly building income from display and performance-based ads.

"We are making great progress in both advertising areas, serving different clients bases from brand advertisers to SMEs (small and medium-sized firms) to e-commerce merchants," he said.

"There is no question that (Weibo's) revenue growth is much higher than our existing portal business."

Critics say Weibo faces a challenge from rival network WeChat, owned by China's Tencent group, but Chao says the two are distinct.

While Weibo's messaging is open and public, WeChat users confine their messages to their own selected groups of followers, keeping discussions private and offering more protection from Beijing's censors.

Even so, he admits, the two compete with each other, in terms of time spent by the users. Yet Weibo has the advantage for advertisers, he insisted.

"Fundamentally... a public network is much more efficient than a private network," he said. "A private network can never be efficient in terms of content distribution."

Chao brushed off the poor IPO result, admitting the pricing was "not ideal," but noting that most new share issues of the past week have not done well.

"It's a tough market... The entire IPO market is rather soft.

"To have a successful listing for us is probably the most important. We do not actually care too much about the temporary price for the stock," he said.

"If we can over the longer term keep executing our strategies and innovating in a very focused way, we can create shareholder value."

He said China's economic slowdown was also not a problem for Sina or Weibo, and could possibly work to its advantage.

"Maybe a downturn in the economy will have some impact on the advertising business we are doing, but over the longer term, we're not concerned at all."

"The Internet has proven that it is very resilient.... What the Internet does is, it increases the efficiency of everything, and so sometimes in bad times Internet companies can perform better."

In New York for the IPO, Chao ran into numerous questions about China's tough censorship of the Internet and especially micro-blogging services where politically sensitive reports and commentary can spread quickly.

Chao repeatedly argues said Weibo has been a key player in reducing Beijing's control on information, and that China has progressed a lot.

But he also says that Sina has learned how to work within the rules to ensure its business stays up.

"There is no question that each country will have their own rules in terms of regulating the content industry or content behavior by users on the Internet... China is no exception," he argued.

"We are very experienced, in terms of complying with the laws and regulations. in this area. So I don't think it's a big concern for us."