SINA Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of SINA (Nasdaq: SINA  ) fell more than 11% in early trading on fears that Chinese regulators would either limit or eliminate the corporate structure that allowed the company to offer shares on the Nasdaq. Sohu.com (Nasdaq: SOHU  ) , NetEase (Nasdaq: NTES  ) , and Baidu (Nasdaq: BIDU  ) also fell.

So what: We've seen this before. Not even a week ago, the same concerns over so-called Variable Interest Entities (VIE) sent the stock lower by 13%. VIE companies circumvent the rules against selling stock to foreign investors by replacing a common equity structure with a series of contractual agreements that resemble the rights assigned to common shares.

Now what: There's really no telling what regulators will do, but a wholesale crackdown seems unlikely. The U.S. is figuring out how to deal with structural economic concerns just as China is rising, thanks mostly to the same Internet concerns now under the microscope. Limiting them now would be akin to pulling star players during the middle of a playoff game. Do you agree? Would you buy any of these Chinese issues at current levels? Please weigh in using the comments box below.

Interested in more info on Sina? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

Motley Fool newsletter services have recommended buying shares of SINA, Sohu.com, Baidu, and NetEase.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On September 26, 2011, at 6:20 PM, cribeiro wrote:

    You have to tell people the truth instead of inventing a story about Sina sell off.

    The REAL reason for the stock to sell off is here, unless you are clue less about what's going on in market

    http://blog.beyond-trading.com/blog/2011/9/26/beyond-trading...

  • Report this Comment On September 26, 2011, at 6:58 PM, BabyBeluga2 wrote:

    I have bought and will continue to buy SINA at these prices. It is a mature company with a growth story well positioned in a fast-growing market. The Chinese will not kill the golden goose.

  • Report this Comment On September 27, 2011, at 2:47 AM, cattywampus wrote:

    Never seen a profile with that many goose eggs in the cribeiro. Hope your basing your comments on more than a couple of goose egg days worth of experience. Zero out of everybody in the rankings doesn't inspire any confidence in me.

  • Report this Comment On September 27, 2011, at 7:26 PM, Shanteram wrote:

    Tim's right to be concerned and equally right to doubt that China will shoot itself in the foot by sabatoging such a popular Chinese stock. Even China needs to curry the favor of the world's investors and their capital. I bought Sina, again, last week. I"ve traded it actively between 80 and 140 or so. Have yet to lose on any trade. Its volatility offers great opportunity for trading.

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