The Chinese adage that the tall blade of grass gets cut first is definitely true this week, as China's top social media and microblogging platform has been ordered to stop its online video operations.

China's State Administration of Press, Publication, Radio, Film and Television issued a statement that all websites and online companies who lack sufficient licenses to provide streaming video services should halt those services immediately.

The sudden order affects not only Weibo, but also Hong Kong-based Phoenix Satellite Television Holdings Ltd.'s Internet video services in China, and VC-backed firm Acfund, according to a report from China Money Network.

Weibo reportedly previously acquired its license, but it was suspended in 2014 because of alleged distribution of pornographic materials.

Overnight, Weibo's shares dropped 5% on the news, which further shows that company fundamentals often take a backseat to the whims of the government.

SARFT tightened requirements for obtaining the "online broadcast certificate" last September, requiring applicants to be 100% state-owned or controlled by state-owned entities, and having registered capital of over RMB10 million. This means the only way for private companies to acquire the certificate is to buy a company that already has the certificate.


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