Reuters has reported that Weibo’s (WB) Chairman and a Chinese state investor are spearheading a plan to privatize the company. Weibo shares jumped as much as 50% after the news emerged and ended the day up 6.32%. The company could end up relisting in China at a much higher valuation.
According to Reuters, Weibo Chairman Charles Chao’s holding company New Wave is partnering with a Shanghai-based state company for the privatization drive. The two intend to form a consortium that could take Weibo private for about $90 to $100 per share.
The deal, which could value Weibo at more than $20 billion, represents an 80% to 100% premium to the stock’s one-month average price of $50. The deal could be finalized before year-end.
Weibo has already refuted the privatization claims reiterating that talks between Chao and the state investor were untrue. The company goes on to state that Chao had no discussions with anyone about delisting the company. (See Weibo stock charts on TipRanks)
Citing three unnamed sources, Reuters reports that the Weibo privatization push stems from Beijing’s drive to have Alibaba (BABA) divest its media holdings that include about 30 media and entertainment firms. As of February, Alibaba held a 30% stake in Weibo, valued at about $3.7 billion as of July 2.
Last month, Morgan Stanley analyst Alex Ko reiterated a Hold rating on Weibo but raised his price target to $58 from $54. This implies that shares are almost fully priced at current levels, with around 0.5% upside potential over the next 12 months.
Consensus among analysts is a Moderate Buy based on 2 Buys and 2 Holds. The average Weibo price target of $59 implies 2.18% upside potential to current levels.
WB scores a 7 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.
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