Sina Investor Seeks Changes in Rare Activism at a Chinese FirmBy
Sina Corp. is being pushed by an investor to consider selling a prized asset or buy back stock in a rare instance of investor activism involving a major Chinese corporation.
Aristeia Capital said the Beijing-based company, which controls Chinese Twitter-like service Weibo Corp., trades at a 41 percent discount to its book value for a disparity of almost $6 billion. That’s in part due to mis-management and the hedge fund wants two board seats to help address what it called years of “critical governance failures.” Aristeia said it’s nominating two director candidates after months of negotiations proved fruitless.
Sina shares have doubled this year, tracking a 160 percent gain for Weibo, as users of the microblogging site surged to 340 million and its market value overtook Twitter Inc. Much of the Chinese company’s success in the past couple of years has resulted from its willingness to chase users other social media services ignore, such as those in rural and regional provinces.
Sina had a 46 percent equity stake in Weibo as of July, although it controlled 72 percent of the voting power.
Aristeia made a number of proposals for boosting value, including a sale of Sina itself or selling its stake in Weibo. It also put forth the idea of a reverse merger in which Weibo buys Sina; and a stock buyback using an estimated $18 cash per share available. In response, Sina said it will continue to hold discussions with the fund but said Aristeia, as a holder of just 3.5 percent of the stock, was pursing a “short-term and self-serving agenda” and an “‘uninformed strategy.”
The two candidates Aristeia put forth wouldn’t add to the available expertise on the board, Sina added.
Since 2014, Sina Chief Executive Officer Charles Chao has ramped up partnerships with cheaper smartphone brands that are popular in rural mining and farming areas, preloading its app on the devices of more than 20 vendors.
Aristeia singled Chao out for criticism in Tuesday’s statement, noting the CEO and chairman kept a permanent seat on the board and benefited from “unnecessary share issuances.” Sina said the holdings of its directors ensured their objectives were aligned with shareholders.
The board “and management team have and will continue to act in the best interests of all Sina shareholders,” the company said. “Consistent with this record, we will continue to actively consider and evaluate all available opportunities to ensure that we realize the company’s full potential and enhance value for all our shareholders.”