A deal could value Weibo at more than $20 billion,
facilitate shareholder Alibaba's exit and see Weibo eventually relist in China
to capitalise on higher valuations, the sources said.
Chairman Charles Chao's holding company New Wave, Weibo's
top stakeholder, is teaming up with a Shanghai-based state company to form a
consortium for the deal, three sources said, without disclosing the state
firm's identity.
The consortium is looking to offer about $90-$100 per share
to take Weibo private, two of the sources said, representing a premium of
80%-100% to the stock's $50 average price over the past month.
The group aims to finalise the deal this year, they said.
Weibo said in a statement that Chao and a state investor
being in talks to take the company private was untrue. It cited Chao as saying
he had had no discussion with anyone regarding delisting the company.
Weibo and Alibaba did not respond to Reuters requests for
further comments. Chao did not respond to request for comment via Weibo parent
company Sina.
Shares in Weibo, which operates a platform similar to
Twitter, surged more than 50% in premarket trading after the Reuters report. Those
gains have shrunk to just over 6% after the opening bell.
BEIJING DRIVE
Three separate sources with knowledge of the matter told
Reuters the plans stem from Beijing's drive to have Alibaba Group Holding Ltd
and affiliate Ant divest their media holdings to rein in their sway over
Chinese public opinion.
All the sources declined to be named due to confidentiality
constraints.
Reuters reported in February that Weibo had hired banks to
work on a Hong Kong secondary listing in the final half of 2021. Sources said
this is no longer the plan.
Alibaba held 30% of Weibo as of February, the latter's
annual report showed, which was worth $3.7 billion as of Friday's close.
REGULATORY CRACKDOWN
Beijing has looked to rein in Chinese billionaire Jack Ma's
Alibaba business empire by unleashing 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 across China's money-spinning
internet sector in recent months.
E-commerce giant Alibaba has invested in nearly 30 media and
entertainment firms including Hong Kong's flagship English-language newspaper
South China Morning Post, Refinitiv data shows.
Chao's mooted deal would likely see it exit Weibo, two of
the sources said.
The plan also reflects China's efforts to tighten control
over private media and internet businesses, sources added.
U.S.-listed Chinese firms also face heightened scrutiny and
potentially stricter audit requirements from U.S. regulators, amid political
tensions between Beijing and Washington.
A number of Chinese companies have already opted out of U.S.
stock exchanges, by going private or returning to equity markets closer to home
via second listings.
There were 16 announced delistings of U.S.-listed Chinese
companies worth $19 billion last year, Dealogic data showed, compared to just
five such deals worth $8 billion in 2019.
China's cabinet said on Tuesday that it would step up
supervision of firms listed offshore citing the need to improve regulation of
cross-border data flows and security.
FIERCE COMPETITION
Weibo has grown at a fast clip since its launch in 2009 in a
market where Twitter is blocked by the government. More than 500 million
Chinese use Weibo to opine on everything from Korean soap operas to China's
latest political intrigue.
Alibaba acquired an 18% stake in Weibo in 2013 via a $586
million investment as its first big move into selling advertisement on China's
social networks. It has since raised its stake.
Weibo, which went public on the Nasdaq in 2014, makes most
of its revenue from online advertising.
That has worried investors as the growth rate of Chinese
online advertising slows and Weibo has also lost ground amid competition with
other tech giants such as ByteDance and Tencent.
The Beijing-based company advertising and marketing revenue
fell 3% last year to $1.5 billion.
Its shares were up 33% this year, after a fall of 12% in
2020. REUTERS
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