Aristeia Urges Sina Corporation Shareholders to Make the Right Choice and Add Fresh Voices to the Companys Board

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Business Wire 16-Oct-2017 9:30 AM
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Aristeia Believes Sina is Severely Undervalued and is Trading at an Unacceptable 39% Discount to NAV
Sees Valuation Gap as Directly Tied to Poor Corporate Governance and Lack of Fresh Perspectives on Sinas Undersized and Insular Board
Urges Shareholders to Reject the Status Quo and Add New Truly Independent Voices to the Board to Complement Existing Skill Sets
Believes Electing Highly-Qualified Nominees Brett Krause and Thomas Manning to the Sina Board Will Enhance Long-Term Shareholder Value Creation
Vote Today on the BLUE Proxy Card FOR BOTH of Aristeias Independent and Highly-Qualified Nominees
GREENWICH, Conn.--(BUSINESS WIRE)-- Aristeia Capital, L.L.C. (collectively with Aristeia Master, L.P. and certain other affiliates, Aristeia or we or us), a long-term investor in Sina Corporation (NASDAQ: SINA) (Sina or the Company) and currently one of the Companys five largest shareholders, owning approximately 3 million shares, today sent a letter to Sina shareholders in connection with Aristeias nomination of two highly-qualified, independent candidates Thomas J. Manning and Brett H. Krause for election to the Companys Board of Directors (the Board) at the upcoming Annual Meeting of shareholders, which is currently scheduled to be held on November 3, 2017. Aristeia urges all Sina shareholders to vote on the BLUE proxy card today. Please visit Aristeias website: www.SinaShareholdersAction.com for additional information, including our in-depth investor presentation, The Case for Change at Sina.
The full text of the letter follows:
October 16, 2017
Dear Fellow Shareholders,
As you know, Aristeia Capital, L.L.C. (collectively with Aristeia Master, L.P. and certain other affiliates, Aristeia or we or us), is engaged in an effort to constructively address the growing valuation gap at Sina Corporation (NASDAQ: SINA) (Sina or the Company). This is why we have nominated two highly-qualified and truly independent nominees Thomas J. Manning and Brett H. Krause to be added to the Companys Board of Directors (the Board) at Sinas upcoming 2017 Annual General Meeting of Shareholders (the Annual Meeting), currently scheduled to be held on November 3, 2017.
As the Annual Meeting rapidly approaches, there has been an increasing number of communications issued from both sides. In the midst of this activity, it is easy to lose focus of the core issues impacting your investment in Sina. In this letter, we will present, simply and clearly, what we see as the essential points that should drive your decision in this important vote.
In our view, this entire contest is fundamentally about three simple issues:
I. Sina is undervalued its shares are trading at a massive discount to net asset value (NAV) and total shareholder return (TSR) has dramatically underperformed its true potential.
II. This valuation gap is a direct result of Sinas poor corporate governance and insular, undersized Board.
III. The addition of fresh perspectives and truly independent voices to the boardroom can drive long-term value creation for shareholders.
In the following paragraphs, we will provide more detail on each of these. Regardless of what Sina has said or may say in the days leading up to the Annual Meeting, we urge you to keep these three key points in mind as you consider your important decision. We believe that a careful analysis of these issues will make it clear that a vote on the BLUE proxy card is warranted.
SINA IS UNDERVALUED ITS SHARES ARE TRADING AT A MASSIVE DISCOUNT TO NAV AND TSR HAS DRAMATICALLY UNDERPERFORMED ITS TRUE POTENTIAL
We estimate that Sina currently trades at a $5.3 billion discount to NAV, representing a staggering 39% discount, despite the Companys assets consisting of its large stake in Weibo Corporation (NASDAQ: WB) (Weibo or WB), cash and other investments that are easily valued. We estimate Sinas NAV to be at least $13.5 billion, while its current market capitalization is only $8.2 billion. Sinas 46% economic ownership (72% voting control) in Weibo alone is worth $10.2 billion before consideration of any control premium, an amount which is $2 billion higher than the Companys entire market capitalization. Sinas discount to NAV is exceptionally large on both an absolute and percentage basis, and that discount has increased by $4 billion since the beginning of 2016! The average discount to NAV for comparable holding companies is 13%. Sinas discount is three times that average, leading to billions of dollars of unrealized value for shareholders.1
Aristeia calculates that Sinas 10-year TSR has been impaired by as much as 217% due to multiple insider share issuances and an excessively wide NAV discount.2 We have outlined actions that we believe could result in immediate share price appreciation of up to 65%, should Sina take the appropriate steps to unlock its existing value.
Shareholders should not be fooled by Sinas short-term share price improvement, as this is solely due to the recent appreciation of Weibos stock price.
Sina has great potential. There are clear ways for Sina to reduce its holding company discount and narrow its discount to NAV if it finally lays out a clear path focused on maximizing shareholder value. Unfortunately, we do not believe these ideas have been given adequate consideration by the Companys Board. Potential ideas to explore include: A sale of Sina to an acceptable third-party buyer; A spin or split-off of all or a significant portion of Sinas Weibo stake to all shareholders; A reverse merger (Weibo acquires Sina); A share repurchase using $500 million to $1 billion of available excess cash.
THIS VALUATION GAP IS A DIRECT RESULT OF SINAS POOR CORPORATE GOVERNANCE AND INSULAR, UNDERSIZED BOARD
-- We believe that substantial shareholder value has been compromised due to the lack of independent perspectives and fresh voices on Sinas insular board. The tenure of its Board members (an average of over 15 years among independent directors) is so long that the Company has not had a new director with fresh perspectives since before the iPhone was invented!
Sinas corporate governance policies do not meet customary standards for U.S.-listed companies.
Sinas continued investment in third parties is not properly explained to investors nor appropriately valued by the market.
One example of the Boards disservice to shareholders is the fact that it implemented Sinas poison pill without shareholder approval, and then waived it solely to permit the Chairman and CEO to increase control. Additionally, the Board has permitted multiple questionable share issuances to corporate insiders which have damaged shareholder value.
In a recently published research report, J.P. Morgan echoed our view, highlighting investor concerns over corporate governance as the top reason for the widening gap in Sinas valuation.3
Rather than substantively refuting any of Aristeias arguments or taking steps to realize the tremendous value in the Company Sina has continued to use inappropriate comparables, irrelevant facts and unsupported assertions in an effort to obfuscate the issues that are truly important to the Companys future and to scare shareholders into believing that the status quo is good enough and is all that shareholders should expect.
THE ADDITION OF FRESH PERSPECTIVES AND TRULY INDEPENDENT VOICES TO THE BOARDROOM CAN DRIVE LONG-TERM VALUE CREATION FOR SHAREHOLDERS
We are working to enhance Sinas Board by electing two highly-qualified and fully-independent directors who will act on behalf of, and be accountable to, all Sina shareholders. Sinas repeated insistence that these individuals will represent only Aristeias interests is simply and utterly false.Neither director candidate has any historic relationship whatsoever with Aristeia. FURTHER, WE ARE NOT PROPOSING THE REMOVAL OF ANY INCUMBENT DIRECTORS. RATHER, WE ARE PROPOSING THAT TRULY INDEPENDENT AND ACCRETIVE SKILL SETS BE ADDED TO THE BOARD.
Our nominees are seasoned international executives with deep experience in China and other Asian markets, who are steeped in the regulatory environment in which Chinese companies operate. They will bring greatly-needed fresh perspectives and truly independent voices to the Sina boardroom and will work constructively alongside incumbent Board members to unlock value for all shareholders.
Mr. Thomas J. Manningis a highly-capable chief executive, board director and corporate advisor. He possesses extensive experience advising companies on management practices and has a track record of successfully running businesses in Asia, Europe and the United States. Currently a Lecturer at The University of Chicago Law School, where he has taught courses on Chinese corporate governance, private equity and U.S.-China relations. Has served as a board member of seven public companies, including five in China, most notably on the board of the systemically important and highly regulated Bank of Communications Co., Ltd (HKSE: 3328.HK). Through his tenure on the Board of Directors of Bank of Communications Co., Chinas fifth largest bank, Mr. Manninggained significant experience in navigating the Chinese regulatory system. Previously CEO of Capgemini Asia Pacific and CEO of Ernst & Young Consulting Asia Pacific. East Asian Studies major who began travelling to Asia in the 1970s, lived and worked in China for 17 years and maintains Hong Kong permanent resident status.
Hear from the Nominee Thomas Manning:
Over nearly two decades living and working in China, and through my continued business involvement in the country, I have formed a deep understanding of the intricacies of corporate governance issues impacting Chinese companies and how to operate within the complex Chinese regulatory system. If elected, I believe that I could bring this valuable experience to bear as an independent, new voice working alongside the current Sina Board to unlock long-term value for shareholders. My foremost desire is to engage constructively with Sinas Board and management team to work through the issues plaguing the Company and to determine the best way forward to enhance value for all shareholders.
Mr. Brett H. Krause is a recognized business leader and highly-respected investment manager. He has unique experience at the intersection of Chinese business, the technology sector and international finance. Has had a 20-year career in Asian banking, including serving as President and Board Director of JPMorgan Chase Bank (China) Company Limited (JPMorgan China), a subsidiary of JPMorgan Chase & Co. (NYSE: JPM) and as Country Officer (CEO) of Citi Vietnam, a subsidiary of Citigroup, Inc. (NYSE: C). Managing Partner of PurpleSky Capital LLC, one of Chinas leading early-stage Angel Venture Capital firms. Mr. Krause has lived in Asia for 21 years and in China for 14 years.
Hear from the Nominee Brett Krause:
If elected to the Sina Board, I believe that I could leverage my strong experience in the Chinese technology and international finance sectors to add a valuable perspective to the Board. I have been deeply involved in building new, successful technology businesses in the region and will be able to utilize this experience in assessing the issues currently facing Sina, while also taking a fresh look at areas for improvement and growth. As someone who will inject a fresh perspective, but who also possesses a deep understanding of the space in which the Company operates, I am confident that I will be able to work seamlessly and cooperatively with the existing Sina Board members to explore creative strategies to unlock value.
***
In less than three weeks, you, our fellow Sina shareholders, will be faced with a crucial decision. Will you vote to add our two highly-qualified nominees to Sinas existing five-member Board of Directors? Or will you accept the status quo, in which Sina is underperforming and not delivering the value you deserve for your investment? This will be your only true chance for change until the next shareholder meeting over a year from now.
Ultimately, we believe that change is needed at Sina to close the valuation gap that currently exists and to drive long-term value for all shareholders. The bottom line is that additional perspectives and fresh voices in the boardroom can only help, not hurt, when it comes to guiding Sina and unlocking shareholder value.
We strongly urge Sinas shareholders to vote FOR both of our independent and highly-qualified nominees on the BLUE proxy card and to return it in the postage-paid envelope provided.
Due to the Companys requirement that proxies must be received by it no later than forty-eight (48) hours prior to the Annual Meeting, it is very important that you return your BLUE proxy card to us as soon as possible to ensure that your vote gets counted. If you have already returned a white proxy card to the Company, you can revoke that card by submitting a later-dated BLUE proxy card.
If you have any questions, or require assistance with your vote, please contact Okapi Partners LLC at the number listed below.
PLEASE SIGN, DATE, AND MAIL THE BLUE PROXY CARD TODAY!
Sincerely,
Robert H. Lynch, Jr.PartnerAristeia Capital, L.L.C.
If you have any questions, or need assistance voting your BLUE proxy card, please contact:
OKAPI PARTNERS 1212 Avenue of the Americas, 24th FloorNew York, NY 10036
Telephone for Banks, Brokers, and International Shareholders: +1 212-297-0720Shareholders may call toll-free (from the U.S. and Canada): 877-796-5274Email: info@okapipartners.com
About Aristeia
Aristeia Capital, L.L.C. (Aristeia) is a global investment manager with a twenty-year track record of executing fundamentally based strategies across the capital structure. Founded in 1997, Aristeia aims to achieve superior, risk-adjusted returns for an investor base that includes pension plans, endowments, foundations, other institutions and private clients. The firms approximately 50 employees are split between its Greenwich, Connecticut headquarters and a New York City office.
Disclaimer
Any views expressed herein represent the opinion of Aristeia, whose analysis is based solely on publicly available information. No representation or warranty is made as to the accuracy or completeness of any information contained therein and Aristeia disclaims all liability based on such information. The information contained herein does not recommend the purchase or sale of any security nor is it an offer to sell or a solicitation of an offer to buy any security. Furthermore, the information contained herein is not intended to be, nor should it be construed or used as, investment, tax or legal advice. Past performance is not indicative of future results. Aristeia has neither sought nor obtained the consent from any third party to use any statements or information contained herein that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein.
1 Aristeia internal analysis, Bloomberg L.P., third-party research. U.S. Primary Listing Holding Companies with $1+ billion market capitalization.
2 See Aristeias Presentation: The Case for Change at Sina.
3 J.P. Morgan Analyst Report, 9/22/17.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171016005646/en/
Investors Okapi Partners LLC Bruce H. Goldfarb / Pat McHugh212-297-0720info@okapipartners.comorMediaSloane & CompanyDan Zacchei / Greg Marose212-486-9500Dzacchei@sloanepr.comGMarose@sloanepr.com
Source: Aristeia Capital, L.L.C.