Sell Side Analysts Love Sina, New Weibo Rules May Change Their Minds

• Posted by bbishop
• on December 16th, 2011

The latest ratings and price targets for Sina ($SINA) per Bloomberg:

Kudos to Paul Wuh of Samsung Securities and the Maxim Group analyst, the only two with “Sell” ratings, though even their targets are much higher than Sina’s current price of $52.80. The majority of the sell side analysts have been far too blase about regulatory risk.

Today’s news that Beijing city demands real name registration for microblogs will probably send the stock even lower. [UDPATE: See Translation Of Beijing's New Weibo Regulations | DigiCha END UPDATE]

Readers of Digicha will not be surprised this news. See August’s Real Name Registration Requirement Coming For Weibo And Other Chinese Social Media? and all my recent posts on Sina.

I will try to write a full post on the new Weibo rules later today. In the meantime this from the August post is still relevant:

There is a rumor circulating that the authorities will soon require real name registration for users of Weibos (microblogs) and other social media in China. Such a regulation would be consistent with the ongoing campaign to control rumors on the Internet.

As part of the online gaming anti-fatigue system, China built a system to verify users’ real names at the time of registration. The Ministry of Public Security provides an API for companies to query the national ID database, but it is expensive; last I heard it costs 4-5 RMB per query. Baidu ($BIDU) required real names for its now shuttered microblogging service Shouba. 5 million or so people signed up, costing Baidu millions of RMB.

Users don’t like forced real name registration, and in a competitive market where Sina ($SINA) and Tencent Weibo do not require real names Baidu did not stand a chance.

The real name registration rumors have a couple of variants. One is that all users will have to have their names verified. That would likely result in a large drop of registered users and activity at Sina and Tencent and Facebook-clones like RenRen ($RENN), if the requirements do extend beyond microblogs. The second version is that unverified users will be allowed to use the social media services but will be restricted in their ability to send content. Either measure would likely mitigate the very real problem of online rumor-mongering.

You can follow me @Niubi on Twitter, @Bill on Stocktwits and @Billbishop on Sina Weibo.

Related posts:

1. Real Name Registration Requirement Coming For Weibo And Other Chinese Social Media?
2. New Registrations For Sina Weibo Appear To Have Fallen Off A Cliff
3. Update On Weibo Real Name Registration And Associated Fees
4. Sina Telling Investors There Will Be No Fees To Verify Real Names
5. Sina Admits It Has Not Complied With Weibo Real Name Registration Rules

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.

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