(Updated with commentary on potential Weibo IPO or carve-out, and possible market reception to a Weibo or Alibaba IPO)NEW YORK ( TheStreet) -- Alibaba's new $586 million, 18% stake in Sina's (SINA - Get Report) "Twitter of China" Weibo unit has investors searching for ways to play Alibaba as rumors swirl about an initial public offering.
Ryan Jacob, chairman of Jacob Asset Management and manager of the Jacob Internet Fund ( JAMFX ), said that Sina is one of his largest positions and that he is pleased that Alibaba's investment has validated Weibo's value. He said he is sure that when investors start to feel more confident about the Chinese economy and Chinese stocks, they will become as enthusiastic about Sina as he is. Alibaba's validation of Weibo's value has only increased his anticipation that shareholder value will be unlocked through a U.S. spin-out or IPO of Weibo. After the move, both companies would be able to define their objectives more clearly to shareholders, he said. Randy Warren, CIO at Warren Financial Service in Exton, Pa. said that a carve-out or partial IPO of Weibo in which Sina retained a 20% to 25% stake would "make a lot of sense." "Sina just pulled in a lot of extra money into their coffers by selling a stake to Alibaba ... they would probably still retain some ownership in that public company so they would have even more money coming into their balance sheet," while being able to focus on its core businesses, he said. Brian Frank, portfolio manager at New York-based Frank Capital, said that shareholders of Yahoo! (YHOO - Get Report), a partial Alibaba owner, and Alibaba would benefit from a Weibo spin-off or IPO too, as cash proceeds from the IPO boost Alibaba's balance sheet and valuation; and in a spin-off, allow Alibaba and Yahoo! shareholders to receive shares of the new company tax-free. Warren said that handset makers are also watching closely for a Weibo IPO, as they have taken a great interest in social networking because it drives traffic to mobile devices. "The handset makers are probably doing exactly that right now, trying to figure out exactly what this is worth to them," said Warren.