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The most interesting tech IPOs in U.S. markets are coming from China. Here’s why

Image Credit: Charles Chan

One Chinese tech giant’s successful IPO last week set the stage for a grand slam by another Chinese giant: the mammoth Alibaba.

Weibo, part of the online media company Sina, is the Chinese micro-blogging service that raised $286 million in its IPO through the issuance of 16.8 million American depository shares at $17 each. As of this writing, share price has reached $23.

The huge Alibaba Group owns a 32 percent share of Weibo, which was increased from 18 percent after Weibo’s IPO. Yahoo owns about a quarter of Alibaba, which, based on terrific fourth-quarter earnings, is currently valued north of $150 billion. Alibaba, based in Hangzhou, is expected to file for an IPO this week, having announced its intentions last month.

“There is some trepidation from investors on Weibo,” Brian Blau, a research director at Gartner told VentureBeat. He attributed this to “the tie-up with Alibaba, [which] may lead some investors to hesitate until Alibaba has its own IPO.”

He noted, “Today, investors seem more enthusiastic about Weibo compared to the day of their IPO last week, and that could mean good news for Alibaba as confidence grows.” Weibo “has had great growth,” Blau told us, “[but] if Weibo is anything like Twitter we will see engagement a real issue,” and that may temper some of the initial excitement.

The Weibo IPO “was not necessarily a stock that will clear a path for Alibaba,” IPO Financial president/founder David Menlow told VentureBeat. “But if the deal had gone lower,” he added, it could have hurt Alibaba’s prospects.

Weibo’s IPO price was at the lower end of the initial $17 to $19 range, and the 16.8 million shares sold were short of the 20 million initially targeted.

Two possible concerns: New Chinese governmental regulations would tighten scrutiny of the currently unrestrained micro-blogs, requiring the hiring of as many as 75,000 human censors. And Weibo faces stiff competition from Tencent’s WeChat messaging and social networking service.

Expectations are that the Alibaba IPO could scale a very high pedestal, possibly achieving the largest tech IPO ever. The current champ is Facebook, which scored $16 billion for its IPO in 2012.

“[Weibo's] offering bodes well for Alibaba,” wrote IPO-watcher Renaissance Capital on its blog today. It noted that, of the 10 IPOs in the last week, eight priced below their initial IPO target range and showed “lackluster average returns of 4 percent.” Two priced at the low end of their range and have risen 19 percent – Weibo and another Chinese company, online real estate listing provider Leju Holdings. Leju’s stock price jump 18.6 percent on the first day.

More about the companies and people from this article:

Alibaba.com is a B2B e-commerce company. Alibaba’s primary business is to serve as a directory of Chinese manufacturers connecting them to other companies around the world looking for suppliers. According to iResearch, it was the lar... read more »

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