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Weibo IPO today

The online Chinese media company Weibo, owned by Sina Corp, is set to list on the NASDAQ today. 

Weibo provides a micro-blogging service similar to Twitter, but when it comes to floating on the stock market the two companies have a different approach to valuations. Weibo has a revenue stream of $1.46 per month per active customer, while Twitter was receiving an income of $2.76 per active client at the time of listing.

When Twitter floated in November it was valued at 39 times its revenue, while Weibo is valued at approximately 18 times its revenue. The social networking service has shed nearly 40% since its high at late December; is Weibo learning from Twitter’s mistakes and deliberately playing down its valuation? The offer price tends to reflect this, with the company expected to start trading around $17-19. Goldman Sachs and Credit Suisse are handling the flotation, and the investment banks value the social media company somewhere between $3.2 and $3.6 billion.

IG is offering a grey market on the market capitalisation level at the end of its first trading day. Client activity in our grey market suggests a valuation of $4.3 billion. This is quite a substantial way off where our grey market activity was in its initial stages in early April, when the expected valuation reached a euphoric $9.2 billion.

The recent selloff in tech stocks and the fairly dismal reception on Wall Street for the King IPO has removed a lot of froth. Fundamentals may also be called into question. Quarterly revenues for the social media company were $67.5 million, doubling those of last year but not unlike Twitter; Weibo has yet to post a profit.

The company posted $47.4 million net loss in the first-quarter, compared to a loss of $19.2 million in the same period last year. 

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