PreMarket Prep Stock Of The Day: Weibo

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Tuesday brought plenty of price action, both up and down, in companies from China that are traded on the U.S. exchanges. One that was moving on the upside and was covered in great detail on the PreMarket Prep show was Weibo Corp WB, the PreMarket Prep Stock of the Day.

The Company: Weibo is the largest social media platform in China. As of 2020, Weibo had 521 million monthly active users and 225 million daily active users, many of whom are drawn there by the millions of key opinion leaders in entertainment, sports and business circles. Sina is the major shareholder, with 44.7% of shares and with 70.8% voting power; Alibaba holds 29.8% of shares and 15.7% voting power.

The News: Before the open, Reuters reported the company’s chairman Charles Chao and a state investor were in talks to take the Chinese company private in a deal that would value the Twitter-like firm at $20 billion minimum, or the $90-$100 range. Also, the deal would facilitate the exit of one major shareholder, Alibaba Group Holding Ltd BABA, from its stake.

Chao, whose holding company New Wave is the largest shareholder of Weibo, was rumored to be teaming up with a Shanghai-based state firm to attempt the transaction.

The Disbelief: When the issue was first being covered on the show, both hosts of the show were skeptical of the deal happening for a variety of reasons.

The sudden burst in the isse from Friday’s close ($54.31) to a premarket high of $81.55 was an opportunity for investors in the issue to “ring the register.”

When the issue was first being discussed on Tuesday's show, it was trading in the $75 area.

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More News: Later on in the show, while our guest was being interviewed, Bloomberg reported the company’s response to the rumor.

Chao said the report was untrue and added that he has had no discussion with anyone regarding privatization of the company.

PreMarket Prep went back to describe the price action after the rumor was debunked by the company.

Price Action During The Regular Session: The massive selling that took place once the rumor was denied carried over into the regular session as well. After opening below $60, the issue had a brief rally to $62.76 and continued its move lower.

It has continued to make lows for the session, with the current one being $57.50 as of 12:30 p.m. EST. In order to fill the void in price from Friday’s session and reach the top of the range, it would need to fall to $54.42.

The stock was up 6.63% at $57.91 at last check Tuesday.