Alibaba to Buy Sina Weibo Stake

Chinese giant Group announced Monday that it had agreed to buy an 18 percent stake in Sina Corporation’s microblogging platform Weibo for $586 million, signaling its intention to capitalize on the growth in and mobile Internet usage. From The New York Times:

The deal values Weibo at about $3.3 billion — equivalent to Sina’s entire market value as of Friday.

Alibaba and Sina also agreed to cooperate in improving ways to marry social networking with e-commerce, as microblogging services like Sina’s continue to grow in popularity. said that last year it had more than 46 million daily active users, an increase of 82 percent from the period a year earlier.

Alibaba also retains the option to increase its stake to 30 percent in the future, according the Financial Times, as one research analyst said that the deal “suggests that Alibaba’s ambitions go beyond just commerce.” The Wall Street Journal reports that the deal also highlights Alibaba’s desire to compete more closely with Holdings, whose Weixin chat application has emerged to rival Sina Weibo.

Some analysts said that Alibaba’s offer for Weibo was generous, according to Reuters, though they pointed out the potential benefits of the strategic alliance:

“(The stake purchase) is as an endorsement from Alibaba … of the value of Sina’s Weibo platform,” Morningstar analyst Dan Su said.

“This indicates the tremendous value of the data that is present on the Weibo platform that can be mined for a lot of activities, such as ecommerce.”

“We believe this deal is very positive for Sina. It instantly gives pricing to Sina Weibo with a valuation of $3.26 billion; the per share base could be $48,” T.H. Capital Research analyst Tian Hou said.

“Sina’s resource consolidation with Alibaba Group, which has a huge dominant position in China’s e-commerce, can escalate Weibo’s development,” she said.

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