This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Weibo Faces the Wall Street Bears

NEW YORK (TheStreet) -- Weibo (WB - Get Report) started trading Thursday and will likely face some angry Wall Street bears.

Had the "Twitter (TWTR) of China" gone public maybe three years ago, the offering could have been a huge hit. Back then, Weibo was the hottest messaging service in China. I remember traveling around the mainland back then and you couldn't get into an elevator without hearing the sound that someone around you had just posted a Weibo on their mobile phones.

The service gave the Chinese people their first real taste of mass communication with others, all allowed by the government.

However, two things happened. Government censors cracked down on some Weibo users including ones known as the "Big Vs" because they are "verified" and have millions of followers in some cases. Also, Tencent's WeChat came along over the last two years and became the preferred way of communicating ideas. An added bonus of WeChat is that your thoughts are only communicated with the friends you choose rather than the open public. Therefore, censorship is not an issue.

Since WeChat's ascension, Weibo can't seem to find its identity or path forward. Its user growth and engagement has been declining, even as it works hard at making money off users. (Sound like another company you know?)

Now the company has chosen to go public at this moment. It has left potential investors underwhelmed. Initially, when Weibo first filed to go public, there was talk it could get a $7 billion or even $8 billion valuation. At the current initial public offering price, it will be a $2.5 billion valuation.

Weibo had wanted to raise $500 million from the offering. Instead, they will get about $258 million today.

Even at this deeper discount though, where does the stock trade once it opens? Judging from the action in Sina's (SINA) stock price recently, most think it will go down further.

However, unlike my colleague Antoine Gara, I don't think Weibo's successful or unsuccessful IPO today will have any effect on the upcoming Alibaba IPO. Alibaba, as we saw in its latest fourth-quarter results announced by Yahoo! (YHOO) on Tuesday, is seeing accelerating growth, not declining.

It might be a better test of Twitter, though.

Twitter is seeking to make as much money from mobile ads as it can, even as its user growth stagnates. Yet, it trades at a 38x trailing price to sales ratio while Weibo gets a 13x price to sales ratio.

Am I missing something?

At the time of publication, the author was long Yahoo! but held no positions in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
WB $11.89 8.09%
AAPL $112.02 2.10%
FB $89.53 2.70%
GOOG $633.89 0.84%
TSLA $239.00 6.30%

Markets

Chart of I:DJI
DOW 16,654.77 +369.26 2.27%
S&P 500 1,987.66 +47.15 2.43%
NASDAQ 4,812.7080 +115.1720 2.45%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs