TWTR - An Arbitrage Opportunity Around Sina And Weibo

Investment Thesis

Sina (SINA), the largest and controlling shareholder of Weibo (WB), has long been under its intrinsic value just based on its holdings of WB. Although a simple long position of SINA will likely be profitable, we proposed a paired trading strategy leveraging the arbitrage opportunity. Our backtest shows that a simple version of the strategy would have been profitable as the market has been trying to correct the fair value gap.

Relationship Between SINA and WB

SINA, one of China's oldest internet companies, hosts a network of news portals and apps. In 2014,

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