Sina Buys 9.05% Of Tudou. Should Investors Cheer? (Updated)
- Posted by bbishop
- on August 29th, 2011
Sina purchased 1,075,000 shares at $29 as part of Tudou’s August 17 IPO. Sina continued buying after Tudou began trading, accumulating another 1,492,570 shares at an average price of $23.60. Sina’s average cost for its stake is $25.86, slightly above Tudou’s latest closing price. At the end of Q2 Sina had approximately $850M in cash, so $66M is a small outlay for the company.
Did Sina save Tudou’s IPO? The investment accounted for approximately 1/6th of Tudou’s entire IPO (including the greenshoe), and given market conditions and Tudou’s checkered history one might wonder if the deal could have been done without an anchor investor such as Sina. One might also ask why Sina was in such a hurry to buy Tudou shares, as they most likely would have been much cheaper if Sina had waited even a few more days.
Sina does not have a great record of recent investments.
The company purchased approximately 20% of Facebook-clone Kaixin001 (founded by a former Sina executive; some Sina executives apparently are also angel investors in the firm). Kaixin001 is struggling, in large part due to the rise of Sina Weibo. Kaixin001 had to postpone its US IPO plans and may be looking for a buyer.
In March 2011 Sina spent $66M to acquire 19% of Mecox Lane, at $6 a share. Mecox Lane ($MCOX), a firm with an even more checkered history than Tudou’s, now trades at $1.85. In less than 6 months Sina has seen nearly $45M in shareholders’ cash incinerated in the Mecox Lane investment, an investment with no obvious strategic rationale.
Sina is a marginal player in online video, a sector with massive growth in users and advertising revenue. Sina competitors like Youku ($YOKU), Baidu $$BIDU), Tencent, and Sohu ($SOHU) have growing web video businesses, so the Tudou deal appears to be Sina’s attempt to gain a credible foothold in one of the fastest growing segments of online advertising. If Sina more tightly integrates Tudou into Weibo then investors in both companies could benefit.
But given Sina’s recent investing track record, Sina and Tudou investors perhaps should be wary of assuming there will be a lot of upside from this deal.
According to Keso, Sina knows that online video advertising is going to be huge, it does not have a credible offering, and is smart enough to understand that it lacks the resources to simultaneously build out Weibo and a web video business. Therefore Keso believes that buying into Tudou at a reasonable price makes sense. Keso writes that Sina picked Tudou over Youku because Tudou is relatively better priced and the lack of concentration among Tudou shareholders may make it easier for Sina to buy a much larger stake in the future.
Keso, whose real name is Hong Bo 洪波, explains that this investment is totally different than the Mecox Lane deal, which he describes as "returning a favor" (投桃报李，还沈南鹏一个人情) to Sequoia China head Neil Shen.
Regular readers of Digicha will remember that Keso has so far been correct in his prediction that the government will not shutter Weibo-Three Reasons The Government Is Unlikely To Shutdown Sina Weibo. END UPDATE]
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Bill Bishop is an American living in Beijing. He is bilingual and has experience working in both US and China. In 1997 he co-founded CBS MarketWatch and stayed until the sale in 2004 to Dow Jones. He was never a journalist, and instead worked in several business roles over the years, the last as head of the MarketWatch consumer Internet business. More »
- Sinocism China Newsletter For 08.30.12
- The Sinocism China Newsletter
- Today’s China Readings July 18, 2012
- Sina Sell-Side Still Searching For Muppets
- China Daily Readings
- Sina Admits It Has Not Complied With Weibo Real Name Registration Rules
- Groupon’s China Firesale
- Apologies For The Hiatus
- Tweeting The Sina Q4 2011 Earnings Call
- Quick Thoughts Ahead Of Sina Earnings
- August 2012
- July 2012
- May 2012
- April 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- Inside Sina Weibo
- Authorities Removing Apple iPads From Chinese Store Shelves? (Updated)
- Reuters: China VIE Company Structure Under Threat
- If Sina Is Cooking Its Books I'll Eat This Blog
- China's Internet: The Invisible Birdcage
- Is Tencent The Wrong Partner For Groupon In China?
- New Report On China's Online Game Industry-$3.6B in 2009 Revenue, $9.2B By 2014
- Do You Know Where Your China Stock CFO Lives?
- CCTV Attacks Baidu, Again
- Why Did Sina Shares Plunge 15% Tuesday?
TagsAdvertising Alibaba Apple Baidu Beijing cctv Censorship china China Mobile Corruption Cyberwar DangDang eCommerce Facebook Fraud Gaming GFW Google Group Buying groupon Internet Investing IPO Media Mobile Music Netease PerfectWorld Piracy Policy Readings Regulations Search Shanda Sina SNS Social Games Tencent Twitter US-China Virtual Items Web Video Weibo WoW WVAS
- Group Buying
- Internet Security
- Listed Firms
- Online Games
- Online Memes
- Online Payments
- Online Trends
- Perfect World
- Public Relations
- Renewable Energy
- Social Gaming
- Traditional Chinese Medicine TCM
- Web Advertising
- Web Video
- World of Warcraft
StockTwits - All Updates