A series of announcements late last week from web portal Sina (SINA) looked like they were clearly aimed at calming nervous investors who might sense the company is at a crossroads that could mark a new downturn for the stock. Sina's unusual early release of preliminary first-quarter results showed the company is still quite healthy financially, despite a recent government crackdown on two of its sites and a lukewarm stock market debut for its Weibo (WB 4.92%) microblogging platform. 
The signs definitely look mixed for Sina, and these two latest announcements show that risks from a business slowdown or government crackdown on pornography are probably relatively small. But momentum investors may not care too much about actual facts, putting more pressure on Sina's shares, which have already given back all of the meteoric gains they posted in the second half of 2013.
Before we zoom in on the latest news, it's helpful to look at stock trends for Sina and Weibo over the last year. After stagnating for several years, Sina shares rallied more than 60% in the second half of 2013, as investors more broadly embraced Chinese Internet stocks after a two-year pause.
Sell-off after license revocations
A new sell-off occurred early last week, when the company revealed that two of its licenses, one for online publishing and another for online audio-video, were revoked due to the presence of pornographic material on two of its sites. The move by the regulator looked largely symbolic, since neither business was important to Sina . Sina has added that the regulator has imposed a large, but quite affordable fine of $815,000 for the violations.
Sina shares fell as much as 14% from previous levels in the days after the regulatory announcement, but have somewhat stabilized since then. In the meantime, Weibo, which is majority owned by Sina and is one of its most valuable assets, isn't doing much to support Sina stock since its own IPO more than two weeks ago. Weibo had to cut the size of its offering nearly in half due to weak demand, and the stock has been volatile since then. It is now up 18% from its offer price.
Against that backdrop, this rare pre-release of Sina's first-quarter results looks like an attempt to reassure investors that the company is in a strong financial position and that its trends look positive. The company said it will report a $33 million net loss for the quarter, due to a $40 million one-time item related to the value of Weibo options. Without that item, the company would have reported a non-GAAP $11 million first-quarter profit, up sharply from $1.5 million a year earlier. Revenue also rose a healthy 35% to $171 million from $126 million a year earlier, as Weibo's contribution continued to grow.
Volatility ahead
What's the bottom line in all this news? Sina clearly wants to send the message that it's a healthy company with good growth prospects, and that Weibo will be an important part of that growth story. Sina looks like a strong investment over the long term as one of China's top independent providers of news and information.
Momentum investors may think differently, and could seize on the regulator's move as an excuse to dump shares over the next few weeks. That means we could see some big volatility in the stock in May and June, even if the longer-term trends should be more positive.
