Time ripe for Weibo to tap market

Source:Agencies Published: 2013-1-4 9:16:50

Weibo is changing Chinese society, but can it change investors' minds? The rambunctious social media site, where over 400 million of the country's Web users post, follow, share and criticize, could be worth multiples of what the market currently suggests. A partial spinoff in 2013 could be a good way to unlock Weibo's charms.

Part social network and part blog, valuing Weibo requires some lateral thinking. The closest US rival, Twitter, is still unlisted. And Weibo's stature outweighs its finances. It has broken news of national disasters and outed corrupt officials, yet only started contributing revenue in the second quarter of 2012.

Say Weibo can produce $1 of income per registered user by 2015, giving total revenue of around $400 million - and that this year's $160 million of costs grow 25 percent by then. On the 15 percent tax rate China offers high-tech firms, that leaves $170 million of earnings. Apply US listed Facebook's 2015 price-to-earnings multiple, and Weibo is worth $4.3 billion.

The author is John Foley, a columnist of Reuters Breakingviews.



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