Sina'S Privatization: Will The Internet "Go Ahead" To Go Home?

On the evening of July 6th, Sina (NASDAQ:SINA) announced that the board of directors had received a non binding privatization offer issued by New Wave MMXV Limited (hereinafter referred to as New Wave), which offered to purchase all the ordinary shares that New Wave did not own at the price of $41 per share.

New Wave is a company registered in the British Virgin Islands and controlled by Sina chairman and CEO Cao Guowei. According to Sina's latest disclosure of equity documents, as of the end of March this year, New Wave holds about 7 million 940 thousand ordinary shares of sina, accounting for 12.2%, and holds 7150 shares of class a preferred stock, with a total voting power of 58%.

In addition to holding Sina shares through New Wave, Cao Guowei also owns about 874 thousand ordinary shares of sina, holding a total of 13.5% shares and 58.6% of the voting rights.

Sina said that the board of directors of the company has formed a special board of directors composed of independent directors Zhang Songyi, Zhang Yichen and Wang Yan to evaluate and consider the privatization offer. At the same time, Sina also stressed to the outside world that at present, the board only received a non binding privatization offer issued by New Wave, and has yet to make any decision on how to respond to the privatization offer.

But an analyst at Tiger securities research team told the economic news reporters in twenty-first Century that Cao Guowei is the largest shareholder of sina and has more than 50% of the voting rights. Therefore, it is no longer important for Sina privatization investors to pay the bill. And for investors, Sina's valuation in the US stock market is very low and not very popular. Now privatization is better than the continued decline in share prices.

Because of this, the price premium offered by Cao Guowei is not high. Prior to the offer, Sina's share price was $36.67 / share, and the offer price was about 11.8% higher than this premium. In July 6th, Sina's share price rose 10.55% to 40.54 USD / share, which is close to the offer price.

On the night of July 6th, Sina announced that the board of directors had received a non binding privatization offer issued by New Wave MMXV Limited. Visual China

Internet "wave" ebb tide

In recent two years, Tencent, Alibaba and other companies have ushered in their 20 year old birthday. For Sina, 2020 is also a "20th anniversary" special node, but unlike other companies' birthday, this year is Sina's listing 20th anniversary.

According to official records, Sina was formally established in December 1998, but if we want to further trace back, Sina's predecessor four links is set up in December 1993.

Compared with the Sohu (February 1998) and NetEase (June 1997) established in the same period, sina is the youngest, but it is the earliest mature. In April 2000, Sina was listed on the Nasdaq market in the US. In the view of the industry, sina is the first stock of China Internet Corporation's listing in the US, especially its VIE structure. It also provides a reference model for Chinese companies listed on the sea.

Portals play an important role in the early development of Internet in China. In September 2000, Jin Yong, a newly born Ma Yun and a knight errant novelist, jointly issued a "hero post". He invited the star entrepreneurs in the Internet field to participate in the "West Lake sword". Among them, the founder of the three portals: Wang Zhidong of sina, Ding Lei of NetEase and Zhang Zhaoyang of Sohu.

In fact, before the advent of the mobile Internet wave, portal websites have been in the high light moment, but in this golden age, the three portals showed different development trajectories, among which Sina was the most difficult.

The most obvious example is that Wang Zhidong, the founder of sina, was forced to leave Sina in the second years when he was listed on the company. After that, the head of sina changed several times until Cao Guowei became chairman and CEO of sina in August 2012.

With the turbulence of management, the business development of sina in the first ten years has not been smooth. Unlike NetEase, which has found the direction of the game, Sohu has built a good tour and Sogou, Sina has never nurtured a new growth point. If it hadn't launched micro-blog platform in August 2009 and successfully seized the track of social media, Sina's story might be another version.

Throughout the 20 year history of listing, the historical peak of sina's stock price appeared in April 2011, about $127.6 / share, and its market capitalization was $about 8000000000, which pushed Sina to the top of its peak. In March, micro-blog registered 100 million users.

Today, Sina has a market capitalization of $2 billion 651 million, while micro-blog listed in 2014 has a market value of $9 billion. According to Sina's 44.9% stake in micro-blog, micro-blog has a market value of $4 billion.

Tiger securities analysts said there were many possible reasons for the privatization of China's stock market. The undervaluation of market capitalization is the main reason for many listed companies. This is also true for Sina. After its privatization, the valuation will certainly be better than it is now.

What changes does privatization bring?

In fact, there are two ways to return stocks to China's capital market at present. One is the two listing of Hong Kong stocks by Alibaba and NetEase, the other is to withdraw the market first and then reappear.

An industry insider who overloaded Internet Co privatization told the twenty-first Century business news reporter that from Sina's point of view, it must still want to return to A shares. According to the previous case, most of the stock market returns to A shares after listing were far higher than those of the US stock market. If the two listing, like Alibaba and NetEase, does not generate much premium for Sina's current market value.

The industry also said, of course, does not exclude Sina after privatization will be split into several companies, the way of medicine, many people want to go. According to press reports, in 2007, the New York Stock Exchange was listed, and in 2015 it was privatized. Then it split its business into three pieces in the form of a split three, and was listed separately.

But for Sina, there are not many options currently available. At present, there are three main products of sina, namely, portals Sina, Sina mobile (mobile portals and mobile apps) and social media micro-blog.

From the product point of view, Sina was the product of sina at the beginning of its establishment, and also the main business of sina listing. Sina mobile is the embodiment of sina network in the mobile terminal. Only micro-blog is a successful product extending from the portal business in the development of more than 20 years. As the most competitive business of sina, it has been listed independently.

And from the perspective of growth prospects, Sina has entered a bottleneck period. At present, Sina's revenue is over reliance on micro-blog, and its structure is single, mainly relying on advertising business. In 2019, Sina's total revenue was $2 billion 160 million, of which advertising revenue was $1 billion 740 million, accounting for over 80%. Instead of advertising revenue of $420 million, mainly including Sina Financial technology business and micro-blog live broadcast revenue.

Moreover, 80% of total revenue comes from micro-blog, 10% from portal advertising, and 10% from financial technology. The decline of portal business is an indisputable fact. Behind this is the change of the information age. With the change of information distribution mode, the market of the portal is constantly being eaten up.

The diversion of user traffic also directly leads to a reduction in the advertising rights of the portal business. In addition, the advertising market has been in a downward trend for nearly two years. In 2019, the advertising revenue of sina portal business was only $216 million, down 25.4% from the same period last year.

As for micro-blog, after many years of continuous growth, micro-blog also showed a peak in the first quarter of this year. According to the first quarter earnings report, micro-blog realized revenue of $323 million 400 thousand, down 19% from the same period last year, of which micro-blog's advertising and marketing revenue was $275 million 400 thousand, down 19% from the same period last year.

In the first quarter, micro-blog's monthly active users were 550 million, a 85 million increase over the same period last year. The growth of users, but the decline in revenue, which reveals the bottleneck of micro-blog's commercialization. If the problem is not solved well, Sina's revenue will continue to be affected.

So for Sina, privatization can only be a signal for its change unless privatization brings more agile management and more centralized power, so that sina can catch some new growth points. Otherwise, privatization alone will not change Sina's current situation.

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