On March 31, Sina's (NASDAQ:SINA) subsidiary Weibo Corporation filed a new version of its IPO prospectus with the SEC. A side-by-side comparison of the two versions (March 14 version; March 31 version) reveals that this latest version includes important new information that was not seen in the first version. Below is the summary of my findings.
First, according to the updated IPO prospectus, Weibo has chosen NASDAQ (instead of NYSE) as the stock exchange to list its shares. The company has also picked "WB" as its ticker symbol. In additional to primary underwriters Goldman Sachs and Credit Suisse, three investment banks have been added as underwriters: Morgan Stanley, Piper Jaffray, and China Renaissance Securities. In addition, JPMorgan Chase Bank, N.A. has been selected as the depositary bank of Weibo's American depositary shares (ADSs).
Second, Weibo has selected Ms. Bonnie Yi Zhang as its Chief Financial Officer, according to the updated prospectus. The original prospectus listed Sina's CFO Herman Yu as Weibo's Acting Chief Financial Officer. According to the updated prospectus, prior to joining Weibo,
Ms. Zhang was the chief financial officer of AdChina Ltd., a company operating an integrated internet advertising platform in China, from May 2011 to February 2014. From October 2007 to April 2011, Ms. Zhang was an audit partner of Deloitte Touche Tohmatsu based in Shanghai, with a focus on serving Chinese companies listed in the United States and Chinese companies making initial public offerings in the United States. From May 2005 to August 2007, she served as a senior manager in the National Office SEC Services group of Deloitte & Touche, LLP."
Third, Weibo expects sequential decline in revenues and a net loss in 1Q14. In the first version of the prospectus, Weibo discussed the seasonality of its business as follows:
"Although the advertising industry in China experiences seasonality and advertising spending tends to be the highest in the fourth quarter of each year, the rapid growth in our business and revenues may potentially offset seasonality in the near term."
In the new version of the prospectus, the discussion of seasonality has been replaced by these sentences:
"The advertising industry in China experiences seasonality. Historically, advertising spending tends to be the lowest in the first quarter of each calendar year due to long holidays around the Lunar New Year. While we are still in the process of preparing our financial statements for the three months ended March 31, 2014, we expect our revenues in this quarter to decrease compared to the three months ended December 31, 2013, primarily due to seasonal trends. As a result, we also expect that we may incur a net loss in the three months ended March 31, 2014 as compared to the net income that we achieved in the previous quarter."
Fourth, the updated prospectus added exceptions to the non-competition agreement between Weibo and SINA. In the original prospectus filed on March 14, Weibo described the non-competition agreement as follows:
SINA has agreed not to compete with the Company during the non-competition period in the business that is of the same nature as the microblogging and social networking business operated by the Company as of the date of the agreement. The Company has agreed not to compete with SINA during the non-competition period in the businesses currently conducted by SINA, other than the microblogging and social networking business currently operated by the Company as of the date of the agreement."
The latest version of the prospectus has changed this description to:
SINA has agreed not to compete with us during the non-competition period in the business that is of the same nature as the microblogging and social networking business operated by us as of the date of the agreement, except for owning non-controlling equity interest in any company competing with us. We have agreed not to compete with SINA during the non-competition period in the businesses currently conducted by SINA, as described in its periodic filings with the SEC, other than the microblogging and social networking business currently operated by us as of the date of the agreement, except for owning non-controlling equity interest in any company competing with SINA."
In conclusion, the updated information indicates Weibo's IPO is going smoothly with important details being finalized. The quarter-over-quarter decline in 1Q14 revenues shows Weibo has passed its hyper-growth period where it was able to overcome typical seasonal weakness during the Chinese New Year holidays. The added exceptions to the non-competition agreement gives both Weibo and Sina the freedom to make strategic investments in emerging Chinese Internet startups.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.