By Julie Zhu and Pei Li
HONG KONG (Reuters) -Nasdaq-listed Weibo Corp's chairman and a Chinese state investor plan to take China's answer to Twitter private, sources told Reuters, sending its shares as much as 50% higher on Tuesday.
A deal could value Weibo at more than $20 billion, facilitate shareholder Alibaba's exit and see Weibo eventually relist in China to capitalise on higher valuations, the sources said.
Chairman Charles Chao's holding company New Wave, Weibo's top stakeholder, is teaming up with a Shanghai-based state company to form a consortium for the deal, three sources said, without disclosing the state firm's identity.
The consortium is looking to offer about $90-$100 per share to take Weibo private, two of the sources said, representing a premium of 80%-100% to the stock's $50 average price over the past month.
The group aims to finalise the deal this year, they said.
Weibo said in a statement that Chao and a state investor being in talks to take the company private was untrue. It cited Chao as saying he had had no discussion with anyone regarding delisting the company.
Weibo and Alibaba did not respond to Reuters requests for further comments. Chao did not respond to request for comment via Weibo parent company Sina.
Shares in Weibo, which operates a platform similar to Twitter, surged more than 50% in premarket trading after the Reuters report. Those gains have shrunk to just over 6% after the opening bell.
Three separate sources with knowledge of the matter told Reuters the plans stem from Beijing's drive to have Alibaba Group Holding Ltd and affiliate Ant divest their media holdings to rein in their sway over Chinese public opinion.
All the sources declined to be named due to confidentiality constraints.
Reuters reported in February that Weibo had hired banks to work on a Hong Kong secondary listing in the final half of 2021. Sources said this is no longer the plan.
Alibaba held 30% of Weibo as of February, the latter's annual report showed, which was worth $3.7 billion as of Friday's close.
Beijing has looked to rein in Chinese billionaire Jack Ma's Alibaba business empire by unleashing a series of investigations and new regulations since last year.
The crackdown followed Ma's public criticism of regulators in a speech in October last year and has swept across China's money-spinning internet sector in recent months.
E-commerce giant Alibaba has invested in nearly 30 media and entertainment firms including Hong Kong's flagship English-language newspaper South China Morning Post, Refinitiv data shows.
Chao's mooted deal would likely see it exit Weibo, two of the sources said.
The plan also reflects China's efforts to tighten control over private media and internet businesses, sources added.
U.S.-listed Chinese firms also face heightened scrutiny and potentially stricter audit requirements from U.S. regulators, amid political tensions between Beijing and Washington.
A number of Chinese companies have already opted out of U.S. stock exchanges, by going private or returning to equity markets closer to home via second listings.
There were 16 announced delistings of U.S.-listed Chinese companies worth $19 billion last year, Dealogic data showed, compared to just five such deals worth $8 billion in 2019.
China's cabinet said on Tuesday that it would step up supervision of firms listed offshore citing the need to improve regulation of cross-border data flows and security.
Weibo has grown at a fast clip since its launch in 2009 in a market where Twitter is blocked by the government. More than 500 million Chinese use Weibo to opine on everything from Korean soap operas to China's latest political intrigue.
Alibaba acquired an 18% stake in Weibo in 2013 via a $586 million investment as its first big move into selling advertisement on China's social networks. It has since raised its stake.
Weibo, which went public on the Nasdaq in 2014, makes most of its revenue from online advertising.
That has worried investors as the growth rate of Chinese online advertising slows and Weibo has also lost ground amid competition with other tech giants such as ByteDance and Tencent.
The Beijing-based company advertising and marketing revenue fell 3% last year to $1.5 billion.
Its shares were up 33% this year, after a fall of 12% in 2020.
(Reporting by Julie Zhu and Pei Li in Hong Kong; Editing by Sumeet Chatterjee, Jason Neely and David Goodman)