That growth has helped boost the bottom line at Sina, which gets 60 percent of its revenue from Weibo. Sina’s adjusted earnings rose to 27 cents per share in the second quarter, compared with the median forecast of 15 cents in a Bloomberg survey of analysts.
Sina and Weibo’s “financials have been very positive,” said Brendan Ahern, the New York-based chief investment officer at KraneShares, which runs an exchange-traded fund investing in Chinese Internet companies. “Ultimately for any shareholder, to be sitting on the same side of the table, knowing the CEO has a lot of skin in the game, is beneficial.”
Financial Engineering
Chao has a history of deft financial maneuvers. As Sina’s chief financial officer in 2005, he helped design a “poison pill” to defeat a hostile takeover attempt by online games developer Shanda Interactive Entertainment Ltd. And in September 2009, Chao, along with a group of other Sina executives with private equity backing, invested $180 million into the company, giving him a 9 percent stake. The firm unveiled Weibo a month earlier, a service that helped Sina’s share price triple over the next two years.
Weibo aside, critics say Chao has failed to drive innovation at Sina, allowing the company’s Internet portal business to lose ground against rivals. Even after its recent surge, Sina’s $5.2 billion market value amounts to less than 20 percent of Netease Inc., another Chinese portal company that listed in the U.S. around the same time Sina did 16 years ago.
Chao “likes to do some financial engineering,” said Henry Guo, an analyst at New York-based M Science LLC who has covered U.S.-listed Chinese stocks for a decade. Other than Weibo, “there was nothing interesting, nothing attractive in terms of a business,” Guo said.
Sina is still worth more than its current market price and Chao has shown a willingness to boost returns for shareholders, according to Tian Hou, founder of TH Data Capital, a New York and Beijing-based research firm specializing in U.S. listed Chinese companies. Sina is about 24 percent undervalued when considering its cash holdings and equity stakes in other companies, Ryan Roberts, a senior research analyst at Hong Kong-based financial advisory firm MCM Partners, estimated in a note to clients Sept. 2, based on analysis of the company’s identifiable investment portfolio.
“Chao took a huge risk -- when he bet the house on it, few people were buying,” Hou said. “It turned out to be a good investment.”
This article was provided by Bloomberg News.