Aristeia Capital says Weibo backer Sina could fetch 67% premium in share sale

The logo of Sina Corp.'s Sina Weibo microblog service is displayed on an Apple Inc. iPad and iPhone in an arranged photograph in Hong Kong, China, on Wednesday, Feb. 5, 2014. Photographer: Brent Lewin/Bloomberg

Aristeia Capital said it believes Sina Corp., which controls the Chinese Twitter-like service Weibo Corp., could fetch as much as $190 a share in a sale, a 67 percent premium to its current price.

Aristeia, which disclosed a 4.2 percent stake in Sina last month, has been pushing the company to explore ways to unlock shareholder value, including potentially through a sale of the company. The Greenwich, Connecticut-based investment firm has put forth two nominees for the company’s board at its annual general meeting Nov. 3.

“Sina’s insular and opaque governance policies, which deviate radically from standard practices for public companies listed in the U.S., have consistently eroded shareholder value and hindered the company from seizing shareholder-friendly opportunities,” Aristeia said in a presentation Thursday.

Sina fired back at the activist’s campaign, saying in its own presentation Thursday that Aristeia’s proposals wouldn’t work and might actually destroy shareholder value.

In addition to exploring a sale, Aristeia is urging the company to spin off all or a significant portion of its stake in Weibo. It urged the company to immediately distribute 30 million shares in Weibo to Sina shareholders, which it said would unlock $38 a share in value.

“This distribution would allow Sina to maintain control of Weibo and continue as its largest economic owner without compromising any of the strategic options listed above,” Aristeia said.

Reverse Merger, Buyback

It’s also urging the company to consider a reverse merger whereby Weibo would acquire Sina for cash and stock that could realize $162 a share in value. In addition, it’s pushing the company to consider buying back $500 million to $1 billion in its stock with its cash on hand.

“These options and others are unlikely to receive full and fair consideration without fresh, independent viewpoints on Sina’s board,” Aristeia said.

Sina defended its record in its presentation, saying its shares have increased 213 percent over the past three years. Aristeia has argued that all of the gain is from the increase in value of Sina’s stake in Weibo.

Sina said its slate of directors had “significant relevant experience” in China’s internet, media and finance industries, including at publicly traded companies operating in the country. It urged investors to vote for its nominee, Yichen Zhang, who it said has more than 25 years of finance and capital markets experience in China.

“Aristeia’s nominees lack understanding and experience, while Aristeia’s real issues seem to be its own fund redemptions and questionable trading calls during a period of share growth at Sina,” Sina said. “Aristeia has no credible plan and its proposals are either not viable or would destroy shareholder value.”

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