No. 1 China Portal Files for NASDAQ Listing

By JONATHAN S. LANDRETH

(Virtual China News -- Mar. 29) Sina.com, China's most visited Web portal, has applied for an initial public offering of four million ordinary shares on the U.S. NASDAQ exchange, following speculation that the company would not make it to market after a management shakeup last fall.

Sina.com, with Web sites and offices in Beijing, Silicon Valley, Hong Kong and Taipei, claims 16.6 million hits per day and had 3.1 million registered users in February, and offers Chinese language news, entertainment, commercial and community services, such as chatrooms and bulletin boards.

Last summer on Wall Street Sina was thought to be the company with the greatest chance at bridging the East-West gap on the Web. It was formed in December 1998 when U.S.-based Sina-net.com, which was created by several graduate students at Stanford University, merged with Stone Rich Sight Information Technology in Beijing.

The company's initial investment came from Goldman Sachs and Flatiron Partners in the amount of US$25 million.

Last fall Sina's mainland chief, Wang Zhidong, after apparently winning out in a boardroom struggle, effectively moved control of the site from Silicon Valley to Beijing, according to the Industry Standard, a magazine devoted to the Internet economy. The result was the departure of the directors from Goldman Sachs and Flatiron Partners, the magazine said.

Government Deal

A NASDAQ IPO raises many new questions about the structure of the company and the way different arms of Sina may be affected by the listing.

Hong Kong media sources reported Saturday that under an agreement with the China Security Regulations Commission and the Ministry of Information Industry, the company would give up its Beijing portal, www.sina.com.cn, and stop offering "content" on the site.

Beijing strictly controls the content of domestic Web sites and tries to control the access its netizens have to non-Chinese sites as well. To evade possible censure should the site's content run afoul of the Chinese government, Web companies have had to be creative in how they define themselves. For example, another Chinese-language site, Sohu.com, has skirted government limits by keeping its base in the U.S.

It was not clear from last weekend's Hong Kong media reports, culled from chinesenewsnet (www.douweinews.com), if content would be removed from the all four Sina sites, or just the mainland-based site.

According to a source familiar with Sina's SEC filing, the company plans to keep its Beijing-based site separate from the public listing. The source declined to clarify how the company's Beijing assets would be accounted for in the stock offering, saying simply that it was just a matter of time before the terms would be made clear.

The source suggested that a Cayman Islands-based holding company would retain control of Sina's Beijing site.

Room for Two

Chinese Web sites have been racing to be the first to market in the U.S. after Hong Kong-based Chinadotcom's hugely successful NASDAQ listing last fall.

Sohu.com and Netease, Sina's two biggest competitors for Chinese Web surfers, have both publicly announced their wishes for NASDAQ listing, which has the potential to furnish the companies with ample foreign capital.

In such a competitive sector, the first companies to secure tens of millions of dollars through a foreign share offering would be able to fund costly marketing campaigns and develop technological applications. It is believed by industry insiders that there is only room on the NASDAQ board for two Chinese Web portal companies.

"There may be only five to six positions in NASDAQ for Asian companies," Tang Yue, chairman of elong.com, a Chinese language Web portal, told Homeway Financial News last week.

Other Backers

In addition to the four million ordinary shares, Sina.com's joint lead underwriters, Morgan Stanley and China International Capital Corp Ltd., will reserve the option to purchase an additional 600,000 ordinary shares to cover over-allotments, a company statement said. Sina's other backers include Dell computers and Japanese IT giant Softbank.

The statement also said Sina plans to to use the net proceeds of the offering for working capital and other general purposes.

Sina.com clinched approval for its foreign listing from two key ministries, according to Mar. 17 report in the Financial Daily, a semi-official Chinese newspaper. The two agencies, the Ministry of Information Industries (MII) and the China Securities Regulatory Commission (CSRC), had the authority to prevent Sina from listing overseas.

Hurst Lin, the chief of operations in California, and the individual in charge of minding the company's preparations for listing, according to the Industry Standard. Lin was not available for comment for this article.

Related stories:

Sina.com Secures Government Listing for NASDAQ Listing (3/18)
Sina, Eachnet Raise Auction Stakes (3/10)
China's Hot Web Sites Go "Offline" for Readers (2/10)
Virtual China, Sina Sign Content License Agreement (2/2)
Sina.com Named China's Most Popular Web Site (1/20)

To reach Jonathan S. Landreth: jslandreth@virtualchina.net