INTERNET: Sina Gives Weibo Dividend, Phoenix Fires Editors

Bottom line: Sina’s award of Weibo shares as a dividend reflects recent strong momentum in Weibo’s business, while Phoenix New Media’s firing of 3 top employees for disciplinary reasons will undermine its news division’s credibility.

Sina gives Weibo shares as dividend

Two of China’s leading news portals are in the headlines today, led by word that industry stalwart Sina (Nasdaq: SINA) is giving stock in its Twitter-like Weibo (Nasdaq: WB) unit to shareholders as a dividend. That particular news comes as shares of both Sina and Weibo have soared over the last 2 months, as Weibo finally starts to realize its profit potential.

Meantime, Phoenix New Media (NYSE: FENG) is in more dubious headlines, with word that 3 high-level employees from its news division have been fired for “serious violations of discipline.” There’s no mention of criminal charges in the reports, which cite an internal memo to employees. But it’s a bit noteworthy that the wording is identical to the frequently used phrase for high Communist Party officials being probed for corruption.

Let’s begin with Sina, whose shares have quietly zoomed over the last 2 months, gaining nearly 50 percent since the end of July. Weibo’s stock has risen by an even more impressive 70 percent over that period, as the company has finally found ways to operate profitably, something the original Twitter (NYSE: TWTR) hasn’t done yet. In its latest quarterly report released earlier this month, Weibo’s profit rose more than 6-fold, as its revenue grew by 36 percent.

That strong performance is probably a major factor behind Sina’s decision to award a dividend to its own shareholders in the form of Weibo stock, as a way to thank them for their patience in Weibo’s less profitable days. (company announcement; Chinese article) At the same time, Sina is retaining a majority stake in Weibo, allowing it to continue including the unit’s financials in its own results.

According to the announcement, Sina shareholders will receive one Weibo share for every 10 Sina shares they own, based on their shareholdings on September 12. The distribution will reduce Sina’s stake in Weibo from the current 54 percent to 51 percent. The distribution translates to a dividend of about $48 for each $765 worth of Sina stock, or about 6 percent, based on their latest share prices. That’s a nice return for anyone who has been patient enough to own Sina and Weibo stock over the years.

Corruption in the News Division

Next there’s the Phoenix news, which comes as the company’s stock moves in the opposite direction from that of Sina and Weibo. More specifically, Phoenix shares have lost around two-thirds of their value over the last 2 years, as the company has failed to diversify beyond the simple news portal business.

Now the latest reports are citing an internal memo saying Phoenix has fired 3 high-level employees from its core news division, accusing them of violation of ethics. (Chinese article) The reports contain the text of the actual memo, which includes the names of the 3 individuals and some of the punishments they will face, including a loss of their share awards in the New York-listed company.

The trio were apparently nabbed in an internal probe, so it’s unclear if any of them will face criminal charges. Use of the phrase “serious violation of discipline“ implies that the trio were probably engaged in some form of corruption. Such corruption is quite rampant in China’s media industry, where reporters and editors often accept gifts and cash for writing positive stories and engage in other similar practices.

Despite their major decline over the last 2 years, Phoenix shares only slipped 1.1 percent in the latest trading session, indicating investors weren’t too concerned about this particular development. Frankly speaking, Phoenix faces much bigger issues due to stiff competition and failure to develop major new products and services. But this scandal certainly won’t help the reputation of its core news division.

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