One of the biggest growth stories out of China right now is SINA Corporation’s (NASDAQ:SINA) Twitter-like micro-blogging site, Weibo. Rumors surfaced during Q2 2010, that SINA might spin off Weibo (pronounced Way-Bwah) with a $100 million investment from search giant Baidu.com, Inc. (NASDAQ:BIDU) and B2B giant Alibaba. Such a move would turn Weibo into an independent company and likely fill the company’s coffers on the strength of a speculative IPO.

The odds of that happening seem scant, though. SINA’s counting on Weibo to fuel the company’s growth. Known predominantly as a Web portal company similar to Yahoo! Inc. (NASDAQ:YHOO), SINA’s been focusing on transforming itself into a social networking site that can tap into a network of outside app developers.

“Weibo is the best opportunity for Sina to transform into an Internet platform,” Ma Yuan, a Beijing-based analyst with Bocom International Holdings Co, told PeopleDaily.com last week. “It is becoming the next killer application on the Internet and mobile phones.”

It’s undeniable, though, that a Weibo IPO would draw lots of attention – and probably lots of dollars. With an estimated 120 million users, Weibo still trails Twitter by some 50 million accounts, but the size of China’s Internet market leaves ample room for growth.

SINA’s shares have priced in a $2 billion valuation on Weibo, according to Goldman Sachs analyst Catherine Leung. In Leung’s mind, that valuation’s steep, as Goldman downgraded SINA’s shares from Buy to Neutral.

I’m not sure I agree. The recent news that Twitter raised capital on valuations around $9 billion makes SINA’s stock look attractive.

Weibo currently dominates China’s micro-blogging industry controlling 87 percent of the market share in the niche. It operates much like Twitter, allowing users to post to the site online or via text message. Posts are limited to 140 characters, as they are on Twitter, but Chinese characters typically allow users to express more with fewer characters. Weibo’s also made significant improvements on Twitter’s model by allowing users to post replies to Weibo “tweets” and upload video and images.

SINA acts surprised when pressed on rumors that Weibo might spin off and IPO on its own. Pen Shaobin, VP of SINA and GM at SINA Weibo, denied rumors that Baidu and Alibaba are looking to invest in Weibo: “It is pure rumor,” he was quoted as saying on DoNews.com.

Interestingly, there was no mention or denial of an IPO in Weibo’s future, but I just don’t see it happening. It’d be like Apple spilling off its iPad division. Weibo’s too integral to SINA’s future to be sold off for a lump sum when the future gains look so promising. Don’t set aside cash waiting for a Weibo IPO, buy SINA shares instead. You’ll probably be better off.

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Tags: Alibaba Group, BIDU, SINA, Twitter, Weibo, YHOO

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