EXCLUSIVE Weibo chairman and state-owned company plan to privatize Twitter in China – sources

HONG KONG, July 6 (Reuters) – The chairman of Nasdaq-listed Weibo Corp (WB.O) and a Chinese state investor plan to keep China’s response to Twitter private, sources told Reuters, sending its shares up to 50% higher on Tuesday.

A deal could value Weibo at more than $ 20 billion, facilitate the exit of shareholder Alibaba and see Weibo eventually re-listing in China to capitalize on higher valuations, the sources said.

President Charles Chao’s holding company New Wave, Weibo’s largest shareholder, is teaming up with a Shanghai-based state-owned company to form a consortium for the deal, three sources said, without revealing the company’s identity. of state.

The consortium is looking to offer around $ 90 to $ 100 per share to privatize Weibo, two of the sources said, which is an 80-100% premium over the average share price of $ 50 over the past month.

The group aims to finalize the deal this year, they said.

Weibo said in a statement that Chao and a public investor were in talks to privatize the company was bogus. He quoted Chao as saying that he had not had any discussions with anyone regarding the delisting of the company.

Weibo and Alibaba did not respond to requests for further comment from Reuters. Chao did not respond to a request for comment via Weibo parent company, Sina.

Shares of Weibo, which operates a platform similar to Twitter (TWTR.N), jumped more than 50% in pre-market trading after the Reuters report. Those gains declined to just over 6% after the opening bell.

BEIJING CONDUCT

Three separate sources familiar with the matter told Reuters the plans stemmed from Beijing’s desire to have Alibaba Group Holding Ltd (9988.HK) and its subsidiary Ant divest their media holdings to curb their influence over Chinese public opinion.

All sources declined to be named due to confidentiality constraints.

Reuters reported in February that Weibo hired banks to work on a secondary listing in Hong Kong in the last half of 2021. Sources said that was no longer the plan. Read more

Alibaba owned 30% of Weibo in February, according to the latter’s annual report, which was worth $ 3.7 billion at Friday’s close.

REGULATORY REPRESSION

Beijing has sought to subdue Chinese billionaire Jack Ma’s Alibaba business empire by launching a series of investigations and new regulations since last year.

The crackdown followed Ma’s public criticism of regulators in a speech in October last year and has swept China’s money-making internet industry in recent months.

E-commerce giant Alibaba has invested in nearly 30 media and entertainment companies, including Hong Kong’s flagship English-language newspaper South China Morning Post, according to data from Refinitiv.

Chao’s proposed deal would likely see him leave Weibo, two of the sources said.

The plan also reflects China’s efforts to tighten control over private media and internet companies, sources added.

Chinese companies listed in the United States also face increased scrutiny and potentially stricter audit requirements from U.S. regulators, amid political tensions between Beijing and Washington.

A number of Chinese companies have already pulled out of US stock exchanges, going without or returning to stock markets closer to home via second listings.

There were 16 reported write-offs of Chinese companies listed in the United States worth $ 19 billion last year, according to Dealogic data, compared to just five of those deals worth $ 8 billion. in 2019.

The Chinese cabinet said on Tuesday it would strengthen oversight of listed companies overseas, citing the need to improve the regulation of cross-border data flows and security. Read more

FIERCE COMPETITION

Weibo has grown rapidly since launching in 2009 in a market where Twitter is blocked by the government. Over 500 million Chinese people use Weibo to provide their opinions on everything from Korean soap operas to China’s latest political intrigues.

Alibaba acquired an 18% stake in Weibo in 2013 through a $ 586 million investment, its first big step in selling Chinese social media ads. He has since increased his stake.

Weibo, which went public on Nasdaq in 2014, derives most of its revenue from online advertising.

This worries investors as the growth rate of Chinese online advertising slows and Weibo has also lost ground to competition from other tech giants such as ByteDance and Tencent (0700.HK).

The Beijing-based company’s advertising and marketing revenue fell 3% last year to $ 1.5 billion.

Its shares have risen 33% this year, following a 12% drop in 2020.

Report by Julie Zhu and Pei Li in Hong Kong; Editing by Sumeet Chatterjee, Jason Neely and David Goodman

Our Standards: Thomson Reuters Trust Principles.