Weibo is China's microblogging service that has been described as Twitter (TWTR) -like, with a little Facebook (FB). According to Weibo's F-1, it ended 2013 with 129.1 million monthly active users, or MAUs, which represented growth of 33% over 2012.
Sina has traded lower despite Weibo's anticipated IPO, and many investors wonder why and whether the stock could go lower. It certainly could.
Weibo's revenue grew 190% last year to $188 million, and now Sina, which owns a 78% pre-IPO stake, is leading a $500 million IPO that'll put Weibo's valuation north of $5 billion. In regards to Sina, this move makes sense, as the demand for users, not necessarily revenue, is quite high following Facebook's $19 billion acquisition of WhatsApp.
But, here's the problem: Valuation multiples for social media-like companies are now seeing a drop. Twitter has seen its valuation fall 24% this year. At its peak, Twitter traded at more than 65 times sales. Today, it trades at 41 times trailing 12-month sales, according to Yahoo! Finance.
Facebook, trading at nearly 21 times sales, has also seen a double-digit percentage decline from a steeper 24-times multiple (peak price/sales). Other big-momentum tech companies like LinkedIn and Yelp have also seen double-digit valuation declines as of late. And for Sina and Weibo, this could be bad news.