SINA management has NOT sold any shares says SINA spokesperson!
Sina’s management hasn’t sold any shares since signing three forward sale agreements with investment banks beginning in September 2010, China Business reported today, citing Sina spokesperson Liu Qi. The management still owns 5.6 million shares of the company through New-Wave Investment Holding Co., Liu said, according to the paper. The company’s business operations remain largely unchanged, said Liu.
I read all 3 SEC documents and still have the following questions:
1. Even though they signed a forward sale agreement, the document says New Wave can use cash to compensate the banks for the shares at the end of the deal in lieu of shares held in escrow if New Wave chooses. It also refers to a floor and ceiling price. Does this mean if the shares appreciate after the deal is signed (higher than the ceiling price), New Wave can choose to borrow money and pay the banks at the ceiling price if the current stock price is now worth substantially more? The SINA spokeperson's statement seems to indicate as much.
2. The first of these deals were signed in Sep 2010 when the stock was still in the 40's and before Weibo had been accounted for in the stock price. Given #1 above, it sounds like the agreements are as much about a hedge against future stock declines as they are about selling out at the price at the time of the deal. Maybe instead of buying puts, New Wave engaged the banks to hedge their shares and also retain voting rights for a couple of years to ensure Weibo could be successfully launched. Any thoughts?
3. The first 2 forward sale documents have been posted for months. Why did the third agreement of 1.25M shares (first 2 were for 2.6M shares) cause such a violent reaction? I would think an agreement when the share price is in the 40's or 70's would cause more concern than an agreement when the share price is at $125. Thoughts?
I do wish SINA would be more forthcoming on the purpose of these sales. It doesn't look great in the rumor mill, but could be simply a common way to hedge a position while retaining upside and voting rights. It is also disconcerting that much of this information comes out on a concall with an Australian bank (based on iChinaReports). I thought SEC rules forced companies to disclose everything in public. I am still a long, but have many questions.
That news was released last week; its the transaction between Goldman Sachs and the CEO. I think it is already baked into the price. I posted teh link last week when everyone was asking why the CEO had sold.