Is Alibaba Interested in Sina?

 | Nov 03, 2015 | 11:50 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

sina

,

baba

,

yoku

,

wb

Chinese online media company Sina (SINA) is trading sharply higher on chatter that Alibaba (BABA) is taking a serious look at acquiring the company like it did with Youku Tudou (YOKU) two weeks ago.

At the time of the Alibaba offer to take out Youku, it had closed the prior day at $20.43 per ADS and Alibaba swooped in the next day and offered $26.50 per ADS or a premium of 30%.

If the same sort of offer is good for Sina as well, we would potentially be looking at a price of approximately $62 per ADS.

If you go back and take a look at the history between the two companies you will find that Alibaba already invested $585 million in Sina's subsidiary Weibo (WB), back in April 2013, in exchange for an $18% stake. Extrapolating the numbers gave us a value for Weibo of $3.25 billion at the time.

At $50 per ADS, which is where Sina is currently trading, its market cap is $2.9 billion, and if Alibaba sticks with a 30% premium (like it did with Youku) to yesterday's closing prices for Sina, the market capitalization for Sina would jump to $3.63 billion.

Weibo is currently valued at $3.5 billion, or less than 10% above what Alibaba invested in exchange for an 18% stake two and a half years ago.

So, I believe a potential deal could happen two ways. Alibaba could:

1) Take advantage of the huge undervaluation of Sina by investors in the ADSs by taking out Sina for $3.63 billion, which would include the Weibo stake worth $3.5 billion at present on the U.S. exchange.

OR

2) Offer $3.63 billion for Sina and make a separate offer for the 82% of Weibo that Alibaba does not currently own.

That's an easy choice for me.

How about for you?

I have added calls on the speculation to my longstanding position in SINA

Columnist Conversations

I recently highlighted WBA as one of the best values available in today's market. Walgreens ...
This trade is NOT for everyone (GE) came very close the 3/26 low @ 12.73 Gaps lower has been a recent daily e...
The support I needed to hold in XLB did not, so the trade is a bust......There may be some lower support at th...
British American Tobacco (BTI) is trading near multi-year lows, yielding 5.6% and about to ex-dividend on June...

BEST IDEAS

REAL MONEY'S BEST IDEAS

News Breaks

Powered by
Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.