IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> is offering 11 million shares to raise $471 million through an HKEx secondary listing. The primary/secondary spilt is 50:50 (Sina is the secondary seller).  </li>
<li>Weibo is navigating macro and regulatory headwinds by delivering better than expected top-line growth, strong margins and cash generation. </li>
<li>While the near-term visibility remains limited, the valuation at last close is undemanding in comparison to historical P/E and PEG ratios. </li>
</ul>



Weibo Corp (WB US) is offering 11 million shares to raise $471 million through an HKEx secondary listing. The primary/secondary spilt is 50:50 (Sina is the secondary seller).  
Weibo is navigating macro and regulatory headwinds by delivering better than expected top-line growth, strong margins and cash generation. 
While the near-term visibility remains limited, the valuation at last close is undemanding in comparison to historical P/E and PEG ratios. 


Weibo Secondary Listing: Braving Uncertainty

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Microblogger <strong><a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a></strong> - China's <strong><a href="https://www.smartkarma.com/entities/twitter-inc" target="_blank" data-smartkarma-citation="entities:667:1" rel="noopener">Twitter Inc (TWTR US)</a></strong> equivalent - has filed an application for a secondary listing of its Class A ordinary shares in Hong Kong</li>
<li>Recently privatised <strong><a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">SINA Corp (Class A) (SINA US)</a></strong> controls 70.6% of the vote, with <strong><a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a></strong> a further 15.7%.</li>
<li>A Reuters article back in July flagged a possible take-private transaction for Weibo at US$90-$100/share.</li>
</ul>


Microblogger Weibo Corp (WB US) - China's Twitter Inc (TWTR US) equivalent - has filed an application for a secondary listing of its Class A ordinary shares in Hong Kong
Recently privatised SINA Corp (Class A) (SINA US) controls 70.6% of the vote, with Alibaba Group (9988 HK) a further 15.7%.
A Reuters article back in July flagged a possible take-private transaction for Weibo at US$90-$100/share.


Weibo (WB US) Files For Hong Kong Listing

Event-Driven

<div>
<p>Back on the 21 June, IR solutions provider <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc (JOBS US)</a> <a href="https://sec.report/Document/0001193125-21-195283/" target="_blank" rel="noopener">announced</a> it had entered into a definitive privatisation agreement at US$79.05/share. </p>
<p>Just last week in <em><a href="https://skr.ma/d8W2a" target="_blank" rel="noopener">51job (JOB US): Searching For Answers</a></em>, when the gross spread to terms was 30.8% -  the widest since the take-private transaction was first floated on the <a href="https://sec.report/Document/0001104659-20-105912/" target="_blank" rel="noopener">17 September 202</a>0 - I thought this was the right price to get involved. </p>
<p>Despite China's ongoing scrutiny of the internet industry, I had not seen any specific issue pushing back on this deal. Additionally,  wasn't helping people find jobs more easily in-line with common prosperity?</p>
<p>51job has now <a href="https://www.sec.gov/Archives/edgar/data/0001295484/000110465921132333/tm2131363d1_sc13da.htm" target="_blank" rel="noopener">updated</a> its Schedule 13D - an SEC form to be filed when a person or group acquires more than 5% of a company. The amendment discusses facility agreements entered into with China Merchants Bank, the lead arranger, and Shanghai Pudong Development Bank Co (joint lead arranger). The facilities provide funding of US$2.275bn, just shy of the US$2.6bn required to complete the transaction.</p>
<p>Shares gained 9.8% on this development, the only newsflow since the firm agreement was entered into. </p>
<p>Timing still remains unknown. However, this is a buy here.</p>
</div>
<p>More below the fold</p>


Back on the 21 June, IR solutions provider 51 Job Inc (JOBS US) announced it had entered into a definitive privatisation agreement at US$79.05/share. 
Just last week in 51job (JOB US): Searching For Answers, when the gross spread to terms was 30.8% -  the widest since the take-private transaction was first floated on the 17 September 2020 - I thought this was the right price to get involved. 
Despite China's ongoing scrutiny of the internet industry, I had not seen any specific issue pushing back on this deal. Additionally,  wasn't helping people find jobs more easily in-line with common prosperity?
51job has now updated its Schedule 13D - an SEC form to be filed when a person or group acquires more than 5% of a company. The amendment discusses facility agreements entered into with China Merchants Bank, the lead arranger, and Shanghai Pudong Development Bank Co (joint lead arranger). The facilities provide funding of US$2.275bn, just shy of the US$2.6bn required to complete the transaction.
Shares gained 9.8% on this development, the only newsflow since the firm agreement was entered into. 
Timing still remains unknown. However, this is a buy here.

More below the fold

51job (JOB US): Shares Pop As Financing Progresses

<div>
<p>On the 21 June, nine months after IR solutions provider <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US)</a> first announced it had received a preliminary non-binding <a href="https://sec.report/Document/0001104659-20-105912/" target="_blank" rel="noopener">Proposal</a> from DCP Capital Partners to acquire all of its shares for US$79.05/common share, 51job <a href="https://sec.report/Document/0001193125-21-195283/" target="_blank" rel="noopener">announced</a> it had entered into a definitive privatisation agreement, also at US$79.05/share. </p>
<p>What appeared to be the clincher for the deal was <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> - 51job's largest shareholder with 34.8% - joining the consortium, which also comprised DCP plus Ocean Link and CEO Rick Yan, both of whom joined following the non-binding proposal <a href="https://ir.51job.com/ir/php/2021/PreRelease20210504.php?0504" target="_blank" rel="noopener">announced</a> on the 4 May. All in, the continuing shareholders and their affiliates hold 56.1% in 51job. </p>
<p>Despite a low-balled Offer - and the prospects of dissension apparent - the deal appeared done. It was just a question of timing.</p>
<p>Then China's internet sector campaign kicked into gear, with 51job ostensibly finding itself lumped (rightly or otherwise) with other internet-related stocks being scrutinised. Or at least, 51job was perceived to be in the cross-hairs. </p>
<p>It doesn't help there has been a complete lack of newsflow on the transaction since the definitive agreement. No mention whatsoever in the 2Q21 results. The current gross spread of 30.8% - well below the undisturbed price - is the widest since the transaction was first floated. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/237/750/original/image_859790017111635317164110.png?1635317164" class="editor-image img-responsive" data-smartkarma-image-id="237750"></figure>
</div>
<div>This looks like the right price to get involved. </div>
<div></div>
<div>
<p>More below the fold</p>
</div>


On the 21 June, nine months after IR solutions provider 51 Job Inc Adr (JOBS US) first announced it had received a preliminary non-binding Proposal from DCP Capital Partners to acquire all of its shares for US$79.05/common share, 51job announced it had entered into a definitive privatisation agreement, also at US$79.05/share. 
What appeared to be the clincher for the deal was Recruit Holdings (6098 JP) - 51job's largest shareholder with 34.8% - joining the consortium, which also comprised DCP plus Ocean Link and CEO Rick Yan, both of whom joined following the non-binding proposal announced on the 4 May. All in, the continuing shareholders and their affiliates hold 56.1% in 51job. 
Despite a low-balled Offer - and the prospects of dissension apparent - the deal appeared done. It was just a question of timing.
Then China's internet sector campaign kicked into gear, with 51job ostensibly finding itself lumped (rightly or otherwise) with other internet-related stocks being scrutinised. Or at least, 51job was perceived to be in the cross-hairs. 
It doesn't help there has been a complete lack of newsflow on the transaction since the definitive agreement. No mention whatsoever in the 2Q21 results. The current gross spread of 30.8% - well below the undisturbed price - is the widest since the transaction was first floated. 


This looks like the right price to get involved. 


More below the fold


China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>Regulatory risk is the major headwind for <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a>, a twitter-like social media platform for sharing news and user opinions.  As Beijing tightening its grip on social media platform, we have observed Weibo's value declining 65% from its high in 3-year period. In the latest move, China reiterates the ban on private enterprise in news organizations. In the past 10 months, the magnitude of policy change on tech giant is unprecedent. The latest rounds of measurements on social media include: 1) crackdown of internet influencer/celebrity culture; 2) adjustment on algorithm-powered feeds; 3) macro impact on SME ad campaign spending. </li>
<li>We believe <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> has strong presence in celebrity and key opinion leaders on social media, which differentiates it from other major platform such as <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)'s  </a>WeChat/QQ, and <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1439927D CH)</a>'s Toutiao.  With its 521 million monthly active users and 225 million daily active users, Weibo is one of the largest social platform.  As more key opinion leaders join Weibo, more users use Weibo to read view the key opinion leaders’ content and engage with them through replying, sharing, and clicking the “Like” button. These key opinion leaders can also get tipping from or sell merchandise to their fans. We believe Weibo's business model and scale is hard to replicate. </li>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> has strategic partnership with <a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">Sina Corp (Class A) (SINA US)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US).</a> The parent company Sina owns 45% Weibo outstanding shares and has 71% voting right. Alibaba owns 30% Weibo outstanding shares and has 16% voting right. Given the recent scrutiny of Alibaba and forcing exit from media industry, we think the upcoming recapitalization of Weibo could be a positive catalyst. Weibo has already explored the potential Hong Kong secondary listing.  And it could use the IPO proceed to partially buyout Alibaba stake. Another option is that new strategic investors could be introduced to take Alibaba's stake as well. <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> is traded at forward 15x consensus P/E, and could deliver 15% revenue CAGR in the next 3 year. We think valuation is attractive for Weibo's scale and monetization potential. </li>
</ul>


Regulatory risk is the major headwind for Weibo Corp (WB US), a twitter-like social media platform for sharing news and user opinions.  As Beijing tightening its grip on social media platform, we have observed Weibo's value declining 65% from its high in 3-year period. In the latest move, China reiterates the ban on private enterprise in news organizations. In the past 10 months, the magnitude of policy change on tech giant is unprecedent. The latest rounds of measurements on social media include: 1) crackdown of internet influencer/celebrity culture; 2) adjustment on algorithm-powered feeds; 3) macro impact on SME ad campaign spending. 
We believe Weibo Corp (WB US) has strong presence in celebrity and key opinion leaders on social media, which differentiates it from other major platform such as Tencent (700 HK)'s  WeChat/QQ, and ByteDance (1439927D CH)'s Toutiao.  With its 521 million monthly active users and 225 million daily active users, Weibo is one of the largest social platform.  As more key opinion leaders join Weibo, more users use Weibo to read view the key opinion leaders’ content and engage with them through replying, sharing, and clicking the “Like” button. These key opinion leaders can also get tipping from or sell merchandise to their fans. We believe Weibo's business model and scale is hard to replicate. 

Weibo Corp (WB US) has strategic partnership with Sina Corp (Class A) (SINA US) and Alibaba Group (BABA US). The parent company Sina owns 45% Weibo outstanding shares and has 71% voting right. Alibaba owns 30% Weibo outstanding shares and has 16% voting right. Given the recent scrutiny of Alibaba and forcing exit from media industry, we think the upcoming recapitalization of Weibo could be a positive catalyst. Weibo has already explored the potential Hong Kong secondary listing.  And it could use the IPO proceed to partially buyout Alibaba stake. Another option is that new strategic investors could be introduced to take Alibaba's stake as well. Weibo Corp (WB US) is traded at forward 15x consensus P/E, and could deliver 15% revenue CAGR in the next 3 year. We think valuation is attractive for Weibo's scale and monetization potential. 


Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

China

SINA Corporation is a global Internet media company operating Chinese-language destination sites. The Company offers a network of branded content and services targeting people of Chinese descent worldwide. SINA.com offers online news, entertainment, community, and commerce through web sites that are produced and updated by local teams in China, Hong Kong, Taiwan, and North America.

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Sina Corp (Class A) (SINA US)

Weibo Secondary Listing: Braving Uncertainty

Weibo is offering 11m shares through an HKEx secondary listing. While the near-term visibility remains limited, the valuation at last close is...

Arun George

Weibo (WB US) Files For Hong Kong Listing

At the time of the rumoured Offer for Weibo, Travis said he'd rather own this 10-15% lower than the current US$58.07/share price. That was...

David Blennerhassett

51job (JOB US): Shares Pop As Financing Progresses

Trading at a gross/annualised spread of 19.8%/56.3%, assuming completion at the end of 1Q22. That still looks attractive,

David Blennerhassett

51job (JOB US): Searching For Answers

Trading at a gross/annualised spread of 30.8%/88.3%, assuming completion 1Q22-end. Despite China's ongoing scrutiny of the internet industry, I've...

David Blennerhassett

Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

Although Weibo (WB.US) is facing regulatory risk and growth is slow, we think valuation is attractive for its scale and monetization potential....

Roger Xie

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