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What: Shares of Chinese Internet portal SINA climbed 10% today on reports that China's largest e-commerce company Alibaba Group plans to buy a stake in its Twitter-like Weibo service.
So what: According to China Business News, Alibaba is considering a 15%-20% stake in SINA Weibo, valuing the microblogging service at roughly $3 billion. Although SINA's core advertising revenues continue to be weighed down by the weak economy, the reported interest from Alibaba reinforces investor optimism over Weibo's explosive growth potential.
Now what: While neither company has yet to confirm the talks, a deal seems beneficial to both sides. Specifically, Alibaba's stake in Weibo could drive significant traffic to its e-commerce sites and SINA could benefit from a much-needed increase in advertising revenue. While investors should never buy into stock based purely on buzz, SINA is certainly worth a closer look given today's news.
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The article Why SINA Shares Surged originally appeared on Fool.com.
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