China’s Twitter Inc (NYSE:TWTR) rival Weibo Corp (ADR) (NASDAQ:WB) saw its value spike on today’s market after the stock was floated for the first time on the New York Exchange. Shares in Weibo went public in New York at 12 PM EST, and rose quickly as investors sought to gain exposure to the Asian microblogging site.
Today’s offering saw Weibo Corp (ADR) (NASDAQ:WB) raise $286 million. The company sold 16.8 million American Depository Units in the offering falling short of the 20 million it said it was planning on selling. The tough climate for tech stocks on Thursday, after the failure of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) to hit earnings targets, is judged to be the reason for the smaller offering.
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Weibo seeks to challenge western dominance
Because of censorship laws and other difficulties, Western internet companies have had trouble breaking into China. That leaves the market with the only true competitor to American dominance of the internet, and makes them an interesting target for investment. Excitement about various internet companies is likely to reach new heights in 2014 after the IPO of Weibo Corp (ADR) (NASDAQ:WB) and the coming IPO of Alibaba.
The bump in the price of Weibo Corp (ADR) (NASDAQ:WB) on its first day trading show that Western investors are hungry for positions in Chinese internet companies. 2014 is the first time that exposure to many of these firms has been offered in this half of the world, and it appears that firms like Weibo are set to benefit.
Twitter Inc (NYSE:TWTR) stock also rose on today’s market, and there seems little chance that the company will come head to head with Weibo Corp (ADR) (NASDAQ:WB) any time soon. The Chinese firm may boast more than 120 million monthly active users, but few of those are likely to have accounts with Twitter. That company’s problems are more fully based in the constraints of its own business, and those issues are sure to affect Weibo prospects as well.
Weibo revenue poses major problem
Despite its massive user base, Weibo Corp (ADR) (NASDAQ:WB) has a big revenue problem. Like many of the Web 2.0 contenders, the company has managed to captivate its audience, but it has not managed to turn that abstraction into cash flow. According to information the company released in the run-up to this offering, it earned revenue of $188 million in 2013 and lost more than $30 million as a result of its operations.
Today’s IPO should furnish the company with a reasonable amount of money to make investments, but whether it can turn those investments into cash flow remains to be seen. The company is in the same position as so many other internet hopefuls, and it must prove to investors who are pouring millions of dollars of expectation into it that it can monetize its user base.