Weibo Corporation IPO

I was looking through Weibo Corporation’s Form F-1 Registration Statement and reading the risk factors. The F-1 raises some interesting issues that you may not see in other registration statements.

We have limited business insurance coverage. The insurance industry in China is still young and the business insurance products offered in China are limited. We do not have any business liability or disruption insurance coverage for our operations. Any business disruption, litigation or natural disaster may cause us to incur substantial costs and divert our resources.

Not just underinsured, but uninsured.

If the chops of our PRC subsidiary, the VIE and the VIE’s subsidiary are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.

Theft or misuse of a company chop? Perhaps a uniquely Chinese problem.

Regulation and censorship of information disseminated over the internet in China may adversely affect our business and subject us to liability for information displayed on our platform.

The detailed explanation includes the usual suspects: “internet content providers and internet publishers are prohibited from posting or displaying over the internet content that impairs the national dignity of China, is reactionary, obscene, superstitious, fraudulent or defamatory, or otherwise violates PRC laws and regulations.” The F-1 also includes an opaque reference to an incident that affected the company.

In March 2012, we had to disable the Comment feature on our platform for three days to clean up feeds related to certain rumors.

I like how the F-1 provided a specific date, but only cited “certain rumors.” While the F-1 does not discuss the nature of the rumors, but a quick Google search uncovers the details.

We are required to verify the identities of all of our users who post on Weibo, but have not been able to do so, and our noncompliance exposes us to potentially severe penalty by the Chinese government.

Sounds more like a confession than a disclosure of risk factors. According to the detailed explanation, Weibo has to verify the identity of its users against a Chinese government database. One of the problems that Weibo has encountered in the verification process is “existing user behaviors.” Is this a polite way of saying that its users are submitting false or incomplete information?

We may have to register our encryption software with Chinese regulatory authorities, and if they request that we change our encryption software, our business operations could be disrupted as we develop or license replacement software.

According to the detailed explanation, “foreign and domestic companies operating in China are required to seek approval from the Office of the State for Cipher Code Administration, the Chinese encryption regulatory authority, for the commercial encryption products they use. Companies operating in China are allowed to use only commercial cipher code products approved by this authority and are prohibited to use self-developed or imported cipher code products without approval.” I bet the NSA wishes that American companies could only use NSA-approved encryption products.

Resources:
Weibo Corp. contracts

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