posted their Q2 results this week. It was no surprise to see a rise in revenue, after media reports during SARS showed China's netizens flocking to the Internet for news and fun.

While the hospitality industry suffered during SARS, the online media realm grew. Dare we say that there is hope in Sina's boardroom for more nefarious reasons for netizens to go online in the future? All's fair in love and business.

Let's glance quickly at Sina's balance sheets to see where all this money is coming from. In the year and a half between 6/30/01 and 12/31/02, outstanding shares increased from 41 million to 45 million. This increased mainly because they used more than 4 million shares to acquire Sun Media in September 2001. At that time, Sina's shares were worth around a dollar. If they had honestly believed in the long term viability of Sina's brand, they would not have given away their own shares so cheaply. Why? Because at current market prices those shares would now be worth more than 110 million. So they gave away 110 million of shareholder value for 4 million. They seem like real geniuses now–or at least bad salesmen. Or maybe they just used "Internet logic" on that one.

Additionally, and like their nemesis, a material part of their revenue is coming from interest income from IPO-related cash. IPO-related cash means the money they made when they first went public. This money just sits in a bank and collects lots of interest.

Until this month, one of the positive factors about Sina is that it had relatively low debt. However, management decided to change that by going out and borrowing nearly 100 million (net proceeds of 97.5 million) by issuing debt. And they seem proud of this because their news release raves about "the successful completion of the first and largest double-zero convertible bond offering". Before the borrowing, the company already had 97 million of cash so why they needed to leverage up the company so much is beyond rationale. Are they buying a yacht? As a result, their quarterly balance sheet should show (it doesn't now because the debt was issued after June 30) liabilities in excess of 120 million while tangible assets are only 130 million. For an Internet company!

Finally, The "Related Party" section of their notes to financial statements is several paragraphs long. Apparently, Sina does business with an ad company that is 75% owned by Yan Wang, Sina's president. You would think that running Sina would take enough energy out of Mr. Yan. Mr. Yan should exclusively concentrate his energies on running Sina for the benefit of Sina's shareholders.

Ok folks, like we mentioned last week with, you should not feel bad that you have not cashed in on the China portal marvels' stock increases. Rubber bands either burst or shrink back down when they are pulled too far, and the roller coaster ride is making us dizzy already.


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