<PAGE> 1
As filed with the Securities and Exchange Commission on October 11, 2000
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SINA.COM
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
CAYMAN ISLANDS 52-2236363
<S> <C>
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
VICWOOD PLAZA, ROOMS 1801-4, 18TH FLOOR
199 DES VOEUX ROAD
CENTRAL, HONG KONG
(852) 2155-8800
(Address of principal executive offices)
-----------------------
SINA.COM
1999 STOCK PLAN
1999 EXECUTIVE STOCK PLAN
(Full title of the Plan)
-----------------------
VICTOR LEE
CHIEF FINANCIAL OFFICER
SINA.COM
1313 GENEVA DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 548-0000
(Name, address and telephone number, including area code, of agent for service)
-----------------------
Copy to:
David Lee
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(650) 854-4488
Page 1 of 29 Pages
Exhibit Index on Page 27
(Calculation of Registration Fee on following page)
<PAGE> 2
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Maximum Amount to be Offering Price Per Aggregate Offering Amount of
Title of Securities to be Registered Registered(1) Share Price Registration Fee
------------------------------------- -------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Ordinary Shares,
$0.133 par value .................... 2,621,469 Shares $ 9.53(2) $ 24,985,876.41 $ 6,596.27
TOTAL 2,621,469 Shares $ 9.53 $ 24,985,876.41 $ 6,596.27
</TABLE>
-----------------------
(1) This Registration Statement shall also cover any additional shares of
Ordinary Shares which become issuable under the plan and any agreements
being registered pursuant to this Registration Statement by reason of
any stock dividend, stock split, recapitalization or any other similar
transaction effected without the receipt of consideration which results
in an increase in the number of the Registrant's outstanding shares of
Ordinary Shares.
(2) Estimated in accordance with Rule 457(c) under the Securities Act of
1933, as amended (the "Securities Act"), solely for the purpose of
calculating the registration fee. The computation is based upon the
average high and low sale prices of the Ordinary Shares as reported on
the Nasdaq National Market on October 5, 2000.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION...........................................4
THE COMPANY...................................................................5
RISK FACTORS..................................................................8
USE OF PROCEEDS..............................................................19
PLAN OF DISTRIBUTION.........................................................19
SELLING SHAREHOLDERS.........................................................20
LEGAL MATTERS................................................................21
EXPERTS......................................................................21
INDEMNIFICATION OF OFFICERS AND DIRECTORS....................................21
</TABLE>
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<PAGE> 3
SINA.COM
FORM S-3 REGISTRATION STATEMENT
CROSS REFERENCE SHEET REQUIRED BY ITEM 501 OF REGULATION S-K FOR THE RESALE
PROSPECTUS CONSTITUTING PART I HEREIN
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<CAPTION>
Item Number and Description in Part I of Form S-3 Caption in Prospectus
<S> <C>
1. FOREPART OF THE REGISTRATION STATEMENT AND OUTSIDE FRONT COVER OUTSIDE FRONT COVER PAGE
PAGE OF PROSPECTUS
2. INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF PROSPECTUS AVAILABLE INFORMATION; INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; TABLE OF CONTENTS
3. SUMMARY INFORMATION "THE COMPANY"
RISK FACTORS RISK FACTORS
RATIO OF EARNINGS TO FIXED CHARGES NOT APPLICABLE
4. USE OF PROCEEDS USE OF PROCEEDS
5. DETERMINATION OF OFFERING PRICE NOT APPLICABLE
6. DILUTION NOT APPLICABLE
7. SELLING SECURITY HOLDERS SELLING SHAREHOLDERS
8. PLAN OF DISTRIBUTION PLAN OF DISTRIBUTION; OUTSIDE FRONT COVER PAGE
9. DESCRIPTION OF SECURITIES TO BE REGISTERED NOT APPLICABLE
10. INTERESTS OF NAMED EXPERTS AND COUNSEL LEGAL MATTERS; EXPERTS
11. MATERIAL CHANGES NOT APPLICABLE
12. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE WHERE YOU CAN FIND MORE INFORMATION
13. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECURITIES ACT LIABILITIES
</TABLE>
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<PAGE> 4
PART I
PROSPECTUS
2,621,469 Shares
SINA.COM
Ordinary Shares
This Prospectus relates to the possible resale by certain Selling
Shareholders (as defined below and as listed on pages 20 through 21 of this
prospectus) from time-to-time of 2,621,469 shares of the Ordinary Shares, par
value $0.133 per share (the "Shares"), of SINA.com, a Cayman Islands corporation
(the "Company"), issued upon the exercise of certain stock options. The Shares
are listed on the Nasdaq National Market under the symbol SINA.
The holders of Shares that may be resold pursuant to this Prospectus are
collectively referred to as the "Selling Shareholders." All Shares covered by
this Prospectus are subject to certain restrictions which lapse over a
prescribed period of time. No Shares may be resold, and the Company will take
actions to prevent any proposed resale, until such time as all restrictions have
lapsed with respect to the Shares being resold. See "Plan of Distribution."
If resold, the Shares would be offered for the respective accounts of
the Selling Shareholders. Any or all of the Selling Shareholders may be deemed
to be affiliates of the Company at the time such shares are offered or sold by
them. See "Selling Shareholders." The Company anticipates that if any of the
Selling Shareholders choose to resell any of the Shares pursuant to this
prospectus, such sales will be transacted by the Selling Shareholders in
ordinary market transactions, in sales pursuant to Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"), or otherwise. The Selling
Shareholders might be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any discounts, concessions, or commissions
received by them, which are not expected to exceed those customary in the types
of transactions involved, or any profit on resales of the Shares by them, may be
deemed to be underwriting commissions or discounts under the Securities Act. The
Company will receive none of the proceeds from any sales of Shares by the
Selling Shareholders.
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PROSPECTIVE INVESTORS SHOULD REVIEW AND CONSIDER CAREFULLY THE DISCUSSION
UNDER "RISK FACTORS," BEGINNING ON PAGE 8.
-----------
We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
should not rely on any unauthorized information. This prospectus does not offer
to sell or buy any shares in any jurisdiction in which it is unlawful. The
information in this prospectus is current as of the date on the cover. The
Company will bear the costs of registering the Shares under the Securities Act.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 11, 2000
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<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-8 that we
filed with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this prospectus in accordance with
the rules of the SEC. We file proxy statements and annual, quarterly and special
reports and other information with the SEC. You can inspect and copy the
registration statement as well as the reports, proxy statements and other
information we have filed with the SEC at the public reference room maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C., and at the SEC Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. You can call the SEC at 1-800-732-0330 for further information about
the public reference rooms. We are also required to file electronic versions of
these documents with the SEC, which may be accessed from the SEC's World Wide
Web site at http://www.sec/gov. Reports, proxy and information statements and
other information concerning SINA.com may be inspected at The Nasdaq Stock
Market at 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in those documents is considered part of this prospectus. Information
that we file with the SEC after the effective date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), until the Selling Shareholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference
in this prospectus:
1. Our prospectus filed on April 12, 2000 pursuant to Rule 424(b)
of the Securities Act;
2. All other reports we have filed with the SEC pursuant to Section
13(a) or 15(d) of the Exchange Act since April 12, 2000,
including our annual reports on Form 10-K for the fiscal year
ended June 30, 2000;
3. The description of our Ordinary Shares contained in a Form 8-A
filed with the SEC under the Exchange Act on April 12, 2000,
including any amendment or report filed for the purpose of
updating such description; and
4. All documents we subsequently file with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, which
documents are deemed to be incorporated by reference in, and to
be a part of, this registration statement from the date of
filing (except that no document shall be deemed to be
incorporated by reference if filed after the filing of a
post-effective amendment which deregisters securities then
remaining unsold).
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference. You should direct
any requests for documents to Victor Lee, 1313 Geneva Drive, Sunnyvale,
California 94089, telephone: (408) 548-0000.
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<PAGE> 6
PROSPECTUS SUMMARY
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE
EVENTS OR TO OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS ARE ONLY
PREDICTIONS. ACTUAL EVENTS OR PERFORMANCE RESULTS MAY DIFFER SIGNIFICANTLY
FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. YOU SHOULD READ THE
FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE ORDINARY SHARES BEING SOLD IN THIS
OFFERING AND OUR HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
WHICH ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
THE COMPANY
SINA.com is a leading Internet media and services company for Chinese
communities worldwide. We offer a portal network of four localized Web sites
targeting China, Taiwan, Hong Kong and overseas Chinese in North America. Our
users enjoy a full array of Chinese-language news, entertainment, e-commerce
platforms, financial information and lifestyle tips covering both global events
and issues and specific topics of interest to the Chinese community. Users can
also shop in our online stores located on our China and North America Web sites
from the convenience of their homes. In addition, we offer proprietary software
products that simplify access to Chinese Internet content.
One of our subsidiaries, Beijing Stone Rich Sight Information Technology
Co. Ltd., or BSRS, a Sino-Foreign joint venture company based in Beijing, China,
began operations in December 1993 as a computer software company focused on
providing solutions to computer users wishing to communicate in Chinese. In May
1996, we launched our online network, then called SRSnet.com, offering
Chinese-language news, information and community features such as bulletin
boards and chat services targeted at online users in China. In March 1999, we
expanded our online network by acquiring Sinanet.com, a leading Chinese-language
Internet content company with offices in California and Taiwan and two distinct
Web sites targeting Chinese users in North America and Taiwan. In July 1999, we
continued our network expansion by launching our Hong Kong destination Web site
targeting Chinese users in Hong Kong.
We make our portal network available without charge to users. Our total
average daily page views have grown from approximately 5 million in June 1999 to
approximately 34 million in June 2000. China Internet users voted our China Web
site as their favorite Web site in various surveys conducted by independent
institutions during the past fiscal year. Because of the popularity and growth
in usage of our Web sites, we attract advertisers and merchants who wish to
target the Chinese market.
We generate revenue primarily through the sale of advertisements,
promotions and sponsorships to advertisers and merchants. The majority of
advertising on our portal network is sold through the Company's internal
advertising sales force. We also derive a portion of revenues from sales of
software products and related licenses to OEM PC manufacturers and corporate PC
users.
We believe Greater China, with an estimated population of 1.3 billion
people in 1999 according to the Economist Intelligence Unit Ltd., presents an
attractive and emerging market opportunity. According to International Data
Corporation, or IDC, between 1999 and 2004, the number of Internet users in
Greater China is expected to grow from 7.6 million to 60.9 million. By the end
of year 2000, IDC estimates that there will be 13.3 million Internet users in
Greater China. As of June 30, 2000, we had approximately 7.2 million
registered users, of which 6.7 million were from the Greater China region.
Internet usage in Greater China is still in the early stages of development
compared with the United States and faces a number of challenges, including the
need for greater infrastructure build-out in China and cultural acceptance of
debit and credit cards. Furthermore, the Chinese government requires companies
that distribute information over the Internet to be licensed in China to do so.
In addition, Chinese government policy limits foreign investment in the
telecommunications services industry, which representatives of the Chinese
government have defined to include Internet-related businesses. The Chinese
government also prohibits the distribution of information over the Internet that
it believes to violate Chinese law, including content that is obscene, incites
violence, endangers national security or is defamatory.
Despite these challenges, the rapid growth in Chinese Internet users is
expected to be accompanied by increased Internet spending and increased
e-commerce revenues in the Greater China market. According to Forrester Research
Inc., advertisers and businesses are projected to increase their Internet
advertising spending in China and Taiwan from $12.0 million in 1999 to $556.0
million in 2004. IDC estimates that, assuming the continued development of
secure online transaction technology thereby increasing confidence in electronic
commerce globally, consumer and business e-commerce revenues from the Greater
China market will increase from $461.6 million in 1999 to $45.9 billion in 2004.
We believe it is reasonable to expect that, over time, secure online transaction
technology will increasingly be available in the Greater China market. In
addition, we cater to the substantial Chinese population residing in the U.S.,
Canada and Southeast Asian countries. It is difficult to accurately predict what
share of this growing Chinese online market we will capture in the future
because of the rapidly changing nature of the Internet industry and the early
stage of development of the Greater China market.
We believe that our leading market position will allow us to compete
effectively in the future against both local content providers such as Sohu.com
and Netease and regional and global
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<PAGE> 7
content providers such as Chinadotcom and Yahoo! for a share of this rapidly
growing online market. We believe that we have achieved our leading market
position by:
o Providing extensive, localized content and a broad range of community
features for the global Chinese community. Our portal network brings
together Chinese Internet users across national and geographic
boundaries, while providing content and services tailored to each
local market. Local content from China, Taiwan, Hong Kong and U.S.
wire services, television stations and newspapers is made available to
all of our Web site production teams so that they can create the
desired mix of local, regional and international content. Although
content may vary across Web sites, our brand identity and look and
feel are consistent across our network. In addition to extensive and
customized global, regional and local content, we provide a broad
range of community features like chat, email and instant messaging
that allow Chinese Internet users worldwide to interact. We
distinguish ourselves from our competitors by offering a customized
Web site for each of the China, Taiwan, Hong Kong and North America
markets.
o Extending our user-friendly software platform to support our portal
network. We have used the brand recognition and large installed base
that we have achieved through our RichWin product to draw traffic to
our Web sites. In addition to providing a link to our destination
sites, our RichWin software also allows users to easily view Chinese
content without regard to the underlying operating system. We sell the
latest version of our RichWin software product to businesses and
consumers and, often at a lower margin, to original equipment
manufacturers and we provide free downloads of older versions of
RichWin on our Web sites to increase our brand recognition and help
drive traffic to our network. Our software development team, which
successfully developed the popular RichWin product, is now being
deployed to develop products to support our portal network. In March
2000, we introduced SinaPlus, our next generation language translation
engine to consumers to further increase user recognition of our Web
sites.
o Leveraging our business models, strategic relationships and technology
across multiple Web sites. We deploy across our network business
models and strategic relationships that we establish in each of our
local markets, thereby allowing us to grow rapidly and effectively. We
also manage a majority of our core technology and applications
centrally, which we believe has enabled us to derive cost savings and
enhanced our ability to grow our network and business quickly and
effectively.
Our strategy is to:
o make SINA.com synonymous with the Internet for the global Chinese
community by aggressively extending our brand recognition;
o draw additional traffic to our Web sites by leveraging our software
distribution channels, providing superior content, services and
performance and growing our global online Chinese community;
o grow our revenues by using the traffic to our Web sites to capitalize
on the growth of online advertising and increase the amount of
e-commerce conducted on our network; and
o pursue strategic partnerships and acquisitions to further penetrate
our market and take full advantage of e-commerce opportunities.
We began operations in December 1993 as a computer software company
focused on providing solutions to computer users wishing to communicate in
Chinese. From our inception through September 1998, our revenues consisted
entirely
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<PAGE> 8
of sales of our RichWin software products and related licenses. In May 1996, we
launched our online network targeted at online users in China. We expanded our
online network in March 1999 by acquiring Sinanet.com, which had two distinct
Web sites targeting Chinese users in North America and Taiwan. In July 1999, we
continued our network expansion by launching our Hong Kong destination web site
targeting Chinese users in Hong Kong.
Since our inception, we have incurred significant net losses and
negative cash flows from operations. We expect our net losses from operations to
continue for the foreseeable future.
Our principal executive offices are located at Vicwood Plaza, Rooms
1801-4, 18th Floor, 199 Des Voeux Road, Central, Hong Kong and our telephone
number at that location is (852) 2155-8800. Our offices in the U.S. are located
at 1313 Geneva Drive, Sunnyvale, CA 94089 and our telephone number at that
location is (408) 548-0000. Our registered office in the Cayman Islands is
located at c/o Maples and Calder, P.O. Box 309, Ugland House, South Church
Street, George Town, Grand Cayman, Cayman Islands. Our offices in China are
located #A1, Wanquanzhuang, Haidian, Beijing. References in the prospectus to
"we," "our," "us" and the "Company" refer to SINA.com, following its
incorporation in July 1997, and to RSIL prior to that date. Our Web sites are
located at www.sina.com, www.sina.com.cn, www.sina.com.tw and www.sina.com.hk.
Information contained in our Web sites does not constitute part of this
prospectus.
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<PAGE> 9
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision in our company. In addition, you should keep in mind that
the risks described below are not the only risks that we face. The risks
described below are all the risks that we currently believe are material risks
of this offering. However, additional risks not presently known to us, or risks
that we currently believe are immaterial, may also impair our business
operations. Moreover, you should refer to the other information contained in
this prospectus for a better understanding of our business.
Our business, financial condition, or results of operations could be
adversely affected by any of the following risks. If we are adversely affected
by such risks, then the trading price of our Ordinary Shares could decline, and
you could lose all or part of your investment.
This prospectus contains forward-looking statements that relate to
future events or to our future financial performance. These statements are only
predictions. Actual events or performance results may differ significantly from
those anticipated in the forward-looking statements.
Because our operating history is limited and the revenue and income
potential of our business and markets are unproven, we cannot predict whether we
will meet internal or external expectations of future performance.
-8-
<PAGE> 10
From our inception through September 1998, our revenues consisted entirely
of sales of our RichWin software products and licenses to copy and use these
products. We continued our software sales during fiscal 1999, but with the
launch of our online network in May 1996 and our acquisition of Sinanet.com in
March 1999, we began to devote our resources primarily to developing our online
Chinese-language network. We believe that our future success depends on our
ability to significantly increase revenue from our Internet advertising and
electronic commerce operations, for which we have a limited operating history.
Accordingly, our prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in an early stage of
development. These risks include our ability to: attract advertisers; attract a
larger audience to our network; respond effectively to competitive pressures and
address the effects of strategic relationships or corporate combinations among
our competitors; maintain our current, and develop new, strategic relationships;
increase awareness of the SINA.com brand and continue to build user loyalty;
attract and retain qualified management and employees; upgrade our technology to
support increased traffic and expanded services; and expand the content and
services on our network.
We have a history of losses and we anticipate future losses.
We have never been profitable. As of June 30, 2000, we had an accumulated
deficit of approximately $63.0 million. We anticipate that we will continue to
incur operating losses for the foreseeable future due to increased sales and
marketing costs, additional personnel hires and our continuing branding
campaign. As a result, we cannot be certain when or if we will achieve
profitability. If we do not achieve or sustain profitability, the market price
of our ordinary shares may decline.
We are relying on advertising sales as a significant part of our future revenue,
but the Internet has not been proven as a source of significant advertising
revenue in Greater China.
Our revenue growth is dependent on increased revenue from the sale of
advertising space on our network and the acceptance and use of electronic
commerce. Online advertising in Greater China is an unproven business and many
of our current and potential advertisers have limited experience with the
Internet as an advertising medium, have not traditionally devoted a significant
portion of their advertising expenditures or other available funds to Web-based
advertising, and may not find the Internet to be effective for promoting their
products and services relative to traditional print and broadcast media.
According to Forrester Research, the dollar amount of the online advertising
market in China in 1999 was approximately $8.0 million. Our ability to generate
and maintain significant advertising revenue will therefore depend on a number
of factors, many of which are beyond our control, including: the development of
a large base of users possessing demographic characteristics attractive to
advertisers; downward pressure on online advertising prices; the development of
independent and reliable means of verifying levels of online advertising and
traffic; and the effectiveness of our advertising delivery, tracking and
reporting systems.
If the Internet does not become more widely accepted as a medium for
advertising, our ability to generate increased revenue will be negatively
affected.
We are relying on electronic commerce as a significant part of our future
revenue, but the Internet has not yet been proven as an effective commerce
medium in Greater China.
Our revenue growth depends on the increasing acceptance and use of
electronic commerce in Greater China. The Internet may not become a viable
commercial marketplace in Asia for various reasons, many of which are beyond our
control, including: inexperience with the Internet as a sales and distribution
channel; inadequate development of the necessary infrastructure to facilitate
electronic commerce; concerns about security, reliability, cost, ease of
deployment, administration and quality of service associated with conducting
business over the Internet; and inexperience with credit card usage or with
other means of electronic payment in China.
If the Internet does not become more widely accepted as a medium for
electronic commerce, our ability to generate increased revenue will be
negatively affected.
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Underdeveloped telecommunications infrastructure has limited and may continue to
limit the growth of the Internet market in China which, in turn, could limit our
ability to grow our business.
The telecommunications infrastructure in China is not well developed.
Although private sector ISPs exist in China, almost all access to the Internet
is accomplished through ChinaNet, China's primary commercial network, which is
owned and operated by China Telecom, a state-owned enterprise directly
controlled by China's Ministry of Information Industry. The underdeveloped
Internet infrastructure in China has limited the growth of Internet usage in
China. If the necessary Internet infrastructure is not developed, or is not
developed on a timely basis, future growth of the Internet in China will be
limited and our business could be harmed.
We must rely on the Chinese government to develop China's Internet
infrastructure and if it does not develop this infrastructure our ability to
grow our business will be hindered.
The Chinese government's interconnecting, national networks connect to the
Internet through government-owned international gateways, which are the only
channels through which a domestic Chinese user can connect to the international
Internet network. We rely on this backbone and China Telecom to provide data
communications capacity primarily through local telecommunications lines.
Although the Chinese government has announced plans to develop aggressively the
national information infrastructure, we cannot assure you that this
infrastructure will be developed. In addition, we have no guarantee that we will
have access to alternative networks and services in the event of any disruption
or failure. If the necessary infrastructure standards or protocols or
complementary products, services or facilities are not developed by the Chinese
government, the growth of our business will be hindered.
You should not rely on our quarterly operating results as an indication of our
future performance because our results of operations are subject to significant
fluctuations.
We may experience significant fluctuations in our quarterly operating
results due to a variety of factors, many of which are outside our control.
Factors that may cause our quarterly operating results to fluctuate include: our
ability to retain existing users, attract new users at a steady rate and
maintain user satisfaction; the announcement or introduction of new or enhanced
services, content and products by us or our competitors; dependence on a limited
number of advertisers, the majority of which have agreements with us that are
cancelable upon a specified notice period, and the loss of any major advertiser;
significant news events that increase traffic to our Web sites; technical
difficulties, system downtime or Internet failures; demand for advertising space
from advertisers; the amount and timing of operating costs and capital
expenditures relating to expansion of our business, operations and
infrastructure; governmental regulation; seasonal trends in Internet use; a
shortfall in our revenues relative to our forecasts and a decline in our
operating results due to our inability to adjust our spending quickly; and
general economic conditions and economic conditions specific to the Internet,
electronic commerce and the Greater China market.
As a result of these and other factors, you should not rely on
quarter-to-quarter comparisons of our operating results as indicators of likely
future performance. Our operating results may be below the expectations of
public market analysts and investors in one or more future quarters. If that
occurs, the price of our ordinary shares could decline and you could lose part
or all of your investment.
Political and economic conditions in Greater China are unpredictable and may
disrupt our operations if these conditions become unfavorable to our business.
We expect to derive a substantial percentage of our revenues from the
Greater China market. Changes in political or economic conditions in the region
are difficult to predict and could adversely affect our operations or cause the
Greater China market to become less attractive to advertisers, which could
reduce our revenues. We maintain a strong local identity and presence in each of
the regions in the Greater China market and we cannot be sure that we would be
able to maintain effectively this local identity if political conditions were to
change. Furthermore, many countries in Asia have experienced significant
economic downturns since the middle of 1997, resulting in slower real gross
domestic product growth for the entire region as a result of higher interest
rates and
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<PAGE> 12
currency fluctuations. If declining economic growth rates persist, expenditures
for Internet access, infrastructure improvements and advertising could decrease,
which would negatively affect our business and our profitability over time. In
addition, the economic downturn in Asia could also lead to a devaluation of the
currency of China, Taiwan or Hong Kong, which would decrease our revenues for
the Greater China region in U.S. dollar terms.
In addition, economic reforms in the region could affect our business in
ways that are difficult to predict. For example, since the late 1970s, the
Chinese government has been reforming the Chinese economic system to emphasize
enterprise autonomy and the utilization of market mechanisms. Although we
believe that these reforms measures have had a positive effect on the economic
development in China, we cannot be sure that they will be effective or that they
will benefit our business.
We may be adversely affected by Chinese government regulation of Internet
companies.
China has recently begun to regulate its Internet sector by making
pronouncements or enacting regulations regarding the legality of foreign
investment in the Chinese Internet sector, the existence and enforcement of
content restrictions on the Internet and the availability of securities
offerings by companies operating in the Chinese Internet sector. In the opinion
of our Chinese counsel, the ownership of BSRS and its businesses comply with
existing Chinese laws and regulations. There are, however, substantial
uncertainties regarding the proper interpretation of current and future Chinese
Internet laws and regulations.
Issues, risks and uncertainties relating to China government regulation of
the Chinese Internet sector include the following:
A prohibition of foreign investment in businesses providing value-added
telecommunication services, including computer information services or
electronic mail box services, may be applied to Internet businesses such as
ours. Some officials of the Chinese Ministry of Information, or MII, have taken
the position that foreign investment in the Internet sector is prohibited.
The MII has also stated recently that it intends to adopt new laws or
regulations governing foreign investment in the Chinese Internet sector in the
near future. If these new laws or regulations forbid foreign investment in the
Internet sector, our business will be severely impaired.
According to press reports, under the agreement reached in November 1999
between China and the United States concerning the United States' support of
China's entry into the World Trade Organization, or WTO, foreign investment in
Chinese Internet services will be liberalized to allow for 49% foreign ownership
in key telecommunication services, including Chinese Internet ventures, for the
first two years after China's entry into the WTO and 50% thereafter. Even if the
terms of this agreement are as reported, the agreement is still subject to
approval by the U.S. President and faces domestic opposition from trade unions,
environmentalists and human rights organizations.
The MII has also stated recently that the activities of Internet content
providers are also subject to regulation by various Chinese government
authorities, depending on the specific activities conducted by the Internet
content provider. According to press reports, various government authorities are
in the process of preparing new laws and regulations that will govern these
activities. The areas of regulation may include online advertising and online
news reporting. In addition, the new laws and regulations may require various
Chinese government approvals for securities offerings by companies engaged in
the Internet sector in China.
The interpretation and application of existing Chinese laws and
regulations, the stated positions of the MII and the possible new laws or
regulations have created substantial uncertainties regarding the legality of
existing and future foreign investments in, and the businesses and activities
of, Chinese Internet businesses, including our business.
Accordingly, it is possible that the relevant Chinese authorities could, at
any time, assert that any portion or all of our existing or future ownership
structure and businesses, or this offering, violates existing or future Chinese
laws
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and regulations. It is also possible that the new laws or regulations governing
the Chinese Internet sector that may be adopted in the future will prohibit or
restrict foreign investment in, or other aspects of, any of our current or
proposed businesses and operations or require governmental approvals for this
offering. In addition, these new laws and regulations may be retroactively
applied to us.
If we are found to be in violation of any existing or future Chinese laws
or regulations, the relevant Chinese authorities would have broad discretion in
dealing with such a violation, including, without limitation, the following:
levying fines; revoking our business license; requiring us to restructure our
ownership structure or operations; and requiring us to discontinue any portion
or all of our Internet business. Any of these actions could cause our business
to suffer and the price of our ordinary share to decline.
We have attempted to comply with the strict licensing and registration
requirements of the PRC government by entering into agreements with two Chinese
entities majority owned by our employees; if the PRC government finds that these
agreements do not comply with the licensing requirements, our business in the
PRC will be adversely affected.
Because the Chinese government restricts foreign investment in
Internet-related businesses, we have restructured our China Internet operations
by forming two Chinese entities to acquire appropriate government licenses to
conduct our business there. The legal uncertainties associated with the Chinese
government regulation may be summarized as follows: whether the Chinese
government may view our restructuring as being in compliance with their
regulations; whether the Chinese government may revoke such business licenses;
whether the Chinese government may impose additional regulatory requirements
with which we may not be in compliance; whether the Chinese government will
permit the Chinese entities to acquire future licenses necessary in order to
conduct operations in China; and whether the Chinese government will restrict or
prohibit the distribution of content over the Internet.
The Chinese government regulates Internet access and the distribution of
news and other information through strict business licensing and registration
requirements and other governmental regulation. With respect to licensing, our
subsidiary Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS, is
currently licensed to operate as a software company. BSRS has entered into
agreements with two Chinese entities: Beijing SINA Interactive Advertising Co.,
Ltd., a Chinese advertising company that is 75% owned by Yan Wang, our general
manager of China operation, and 25% owned by BSRS, and which we refer to as the
Ad Company, and Beijing SINA Internet Information Services Co., Ltd., a Chinese
Internet content provider that is 70% owned by Zhidong Wang, our president and
chief executive officer and 30% owned by Yan Wang and which we refer to as the
ICP Company.
Pursuant to these agreements, the ICP Company is responsible for operating
www.sina.com.cn in connection with its Internet content company license and will
sell advertising space on www.sina.com.cn to the Ad Company. The Ad Company, in
turn, will sell advertisements in this space to third parties under its
advertising license. In addition, BSRS has licensed intellectual property and
transferred equipment to the ICP Company, and acts as the ICP Company's provider
of technical services, all in exchange for fees or other payments. BSRS will
also be a consultant and service provider to the Ad Company for its domestic
Chinese customers.
We cannot be sure that these and other corporate activities carried out by
us will be viewed by Chinese regulatory authorities as in compliance with
applicable licensing requirements. Our business in China will be adversely
affected if our business license is revoked as a result of non-compliance. In
addition, we cannot be sure that we will be able to obtain all of the licenses
we may need in the future or that future changes in Chinese government policies
affecting the provision of information services, including the provision of
online services and Internet access, will not impose additional regulatory
requirements on us or our service providers or otherwise harm our business.
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We depend upon contractual arrangements with the Ad Company and the ICP Company
for the success of our operations in China and these arrangements may not be as
effective in providing operational control as direct ownership of these
businesses.
Because we are restricted by the Chinese government from providing Internet
and advertising services directly in China, we are dependent on the Ad Company,
of which we own 25% and the ICP Company, of which we have no ownership interest,
to provide such services through contractual agreements between the parties.
This arrangement may not be as effective in providing control over advertising
and Internet content operations in China as direct ownership of these
businesses. For example, the Ad Company or ICP Company could fail to take
actions required for our business, such as entering into advertising contracts
with potential customers or failing to maintain our China Web site. The ICP
Company will also be able to transact business with third parties not affiliated
with BSRS. If the Ad Company or ICP fails to perform its obligations under these
agreements, we would potentially have to rely on legal remedies under Chinese
law, which we cannot be sure would be effective.
The ICP Company is controlled by Zhidong Wang, our president and chief
executive officer. As a result, our contractual relationships with the ICP
Company would be viewed as entrenching his management position or transferring
certain value to him, especially if any conflict arose with him.
We may not be in compliance with Chinese government regulations relating to
foreign investment prohibitions and, if so determined, the Chinese government
could cause us to discontinue our operations in China.
Chinese government policy prohibits foreign investment in the
telecommunications services industry, which he has defined to include
Internet-related businesses. While we believe that we are in compliance with
current Chinese government policies, we cannot be sure that the government will
view our business as in compliance with these policies or any policies that may
be made in the future. If we are not viewed as complying with these policies or
any regulations that may be created relating to foreign ownership of Internet-
related businesses, the Chinese government could require us to discontinue our
operations in China or take other actions that could harm our business.
Even if we are in compliance with Chinese governmental regulations relating to
licensing and foreign investment prohibitions, the Chinese government may
prevent us from distributing, and we may be subject to liability for, content
that it believes is inappropriate.
China has enacted regulations governing Internet access and the
distribution of news and other information. In the past, the Chinese government
has stopped the distribution of information over the Internet that it believes
to violate Chinese law, including content that is obscene, incites violence,
endangers national security, is contrary to the national interest or is
defamatory. In addition, we may not publish certain news items, such as news
relating to national security, without permission from the Chinese government.
Furthermore, the Ministry of Public Security has the authority to cause any
local Internet service provider to block any Web site maintained outside China
at its sole discretion. Even if we comply with Chinese governmental regulations
relating to licensing and foreign investment prohibitions, if the Chinese
government were to take any action to limit or prohibit the distribution of
information through our network or to limit or regulate any current or future
content or services available to users on our network, our business would be
harmed.
In addition, under recently adopted regulations, Internet companies which
provide bulletin board systems, chat rooms or similar services, such as our
company, must apply for the approval of the State Secrecy Bureau. As the
implementing rules of these new regulations have not been issued, however, we do
not know how or when we will be expected to comply. We cannot assure you that
our business, financial condition and results of operations will not be
materially and adversely affected by the application of these regulations.
We are also subject to potential liability for content on our Web sites
that is deemed inappropriate and for any unlawful actions of our subscribers and
other users of our systems under regulations promulgated by the Chinese Ministry
of Information and Industry. Furthermore, we are required to delete content that
clearly violates the laws of
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China and report content that we suspect may violate Chinese law. It is
difficult to determine the type of content that may result in liability for us,
and if we are wrong, we may be prevented from operating our Web sites.
We may have to register our encryption software with Chinese regulatory
authorities, and if they request that we change our encryption software, our
business operations will be disrupted as we develop or license replacement
software.
Pursuant to the Regulations for the Administration of Commercial Encryption
promulgated at the end of 1999, foreign and domestic Chinese companies operating
in China are required to register and disclose to Chinese regulatory authorities
the commercial encryption products they use. Because these regulations have just
recently been adopted and because they do not specify what constitutes
encryption products, we are unsure as to whether or how they apply to us and the
encryption software we utilize. We may be required to register, or apply for
permits with the relevant Chinese regulatory authorities for, our current or
future encryption software. If Chinese regulatory authorities request that we
change our encryption software, we may have to develop or license replacement
software, which could disrupt our business operations.
The markets in which we operate are highly competitive, and we may be unable to
compete successfully against new entrants and established industry competitors,
many of which have greater financial resources than we do or currently enjoy a
superior market position than we do.
The Asian market for Internet content and services is competitive and
rapidly changing. Barriers to entry are minimal, and current and new competitors
can launch new Web sites at a relatively low cost. Many companies offer Chinese
language content and services, including informational and community features,
and email and electronic commerce services in the Greater China market that may
be competitive with our future offerings. We also face competition from
providers of software and other Internet products and services that incorporate
search and retrieval features into their offerings. In addition, entities that
sponsor or maintain high-traffic Web sites or that provide an initial point of
entry for Internet users, such as ISPs, including large, well-capitalized
entities such as Microsoft (MSN), Yahoo!, Cable & Wireless HKT (Netvigator) and
AOL, currently offer and could further develop or acquire content and services
that compete with those that we offer. We expect that as Internet usage in
Greater China increases and the Greater China market becomes more attractive to
advertisers and for conducting electronic commerce, large global competitors may
increasingly focus their resources on the Greater China market. We also compete
for advertisers with traditional media companies, such as newspapers, television
networks and radio stations, that have a longer history of use and greater
acceptance among advertisers. In addition, providers of Chinese language
Internet tools and services may be acquired by, receive investments from or
enter into other commercial relationships with large, well-established and
well-financed Internet, media or other companies. For example, America Online
Inc. and Xinhua News Agency, one of our content suppliers, are major
shareholders of Chinadotcom, Intel Corporation is a major shareholder of
Sohu.com, and News Corp Ltd. is a major shareholder of Netease.com.
A number of our current and potential future competitors have greater name
recognition, larger customer bases and greater financial and other resources
than we have, and may be able to more quickly react to changing consumer
requirements and demands, deliver competitive services at lower prices and more
effectively respond to new Internet technologies or technical standards.
Increased competition could result in reduced page views, loss of market
share and lower profit margins from reduced pricing for Internet-based services.
If we fail to develop successfully and introduce new products and services, our
competitive position and ability to generate revenues will be harmed.
We are developing new products and services. The planned timing or
introduction of new products and services is subject to risks and uncertainties.
Actual timing may differ materially from original plans. Unexpected technical,
operational, distribution or other problems could delay or prevent the
introduction of one or more of our new
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products or services. Moreover, we cannot be sure that any of our new products
and services will achieve widespread market acceptance or generate incremental
revenue.
We have contracted with third parties to provide content and services for our
portal network and to distribute our software, and we may lose users and revenue
if these arrangements are terminated.
We have arrangements with a number of third parties to provide content and
services to our Web sites and to distribute our software. In the area of
content, we have relied and will continue to rely almost exclusively on third
parties for content that we publish under the SINA brand. Although no single
third party content provider is critical to our operations, if these parties
fail to develop and maintain high-quality and successful media properties, or if
a large number of our existing relationships are terminated, we could lose users
and advertisers and our brand could be harmed.
In the area of Web-based services, we have contracted with AltaVista and
OpenFind for integrated Web search technology to complement our directory and
navigational guide, and with Critical Path for our email services and
third-party providers for our principal Internet connections. If we experience
significant interruptions or delays in service, or if these agreements terminate
or expire, we may incur additional costs to develop or secure replacement
services and our relationship with our users could be harmed.
We depend on a third party's proprietary and licensed advertising serving
technology to deliver advertisements to our network. If the third party fails to
continue to support its technology or if its services fail to meet the
advertising needs of our customers and we cannot find an alternative solution on
a timely basis, our advertising revenue would decline.
In order to create traffic for our online properties and make them more
attractive to advertisers and consumers, we have entered into distribution
agreements and informal relationships with ISPs and personal computer
manufacturers for the distribution of our software. These distribution
arrangements typically are non-exclusive, and may be terminated upon little or
no notice. If our software distributors were to terminate or modify their
distribution arrangements, our ability to promote our network and generate
revenue could be harmed.
Our business and growth will suffer if we are unable to hire and retain key
personnel that are in high demand.
We depend upon the continued contributions of our senior management and
other key personnel, many of whom are difficult to replace. The loss of the
services of any of our executive officers or other key employees could harm our
business. We have experienced changes to our executive management team.
Following our acquisition of Sinanet.com, James Sha served as our chief
executive officer from March 1999 to August 1999. Mr. Sha resigned as chief
executive officer on August 31, 1999 and resigned as a member of our Board of
Directors on September 26, 1999. In August 1999, Zhidong Wang, who has served as
our president since October 1997, was promoted to the position of chief
executive officer. We had two chief financial officers resign in 1999. In
November 1999, Victor Lee joined us as chief financial officer. Our future
success will also depend on our ability to attract and retain highly skilled
technical, managerial, editorial, marketing and customer service personnel,
especially qualified personnel for our international operations in Greater
China. In particular, we have experienced difficulty in hiring and retaining
qualified personnel for our Hong Kong office and may experience similar problems
in our other regional offices. Qualified individuals are in high demand, and we
may not be able to successfully attract, assimilate or retain the personnel we
need to succeed.
We may not be able to manage our expanding operations effectively, which could
harm our business.
We anticipate significant expansion of our business as we address growth in
our customer base and market opportunities. In addition, the geographic
dispersion of our operations requires significant management resources that our
locally-based competitors do not need to devote to their operations. In order to
manage the expected growth of our operations and personnel, we will be required
to improve existing and implement new operational and financial systems,
procedures and controls, and to expand, train and manage our growing employee
base. Further, our management will be required to maintain and expand our
relationships with various other Web sites, Internet
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and other online service providers and other third parties necessary to our
business. We cannot assure you that our current and planned personnel, systems,
procedures and controls will be adequate to support our future operations.
Concerns about the security of electronic commerce transactions and
confidentiality of information on the Internet may reduce use of our network and
impede our growth.
A significant barrier to electronic commerce and communications over the
Internet in general has been public concern over security and privacy,
especially the transmission of confidential information. If these concerns are
not adequately addressed, they may inhibit the growth of the Internet and other
online services generally, especially as a means of conducting commercial
transactions. If a well-publicized Internet breach of security were to occur,
general Internet usage could decline, which could reduce traffic to our
destination sites and impede our growth.
Currency fluctuations and restrictions on currency exchange may adversely affect
our business, including limiting our ability to convert Chinese renminbi into
foreign currencies and, if renminbi were to decline in value, reducing our
revenues in U.S. dollar terms.
We generate revenues and incur expenses and liabilities in Chinese
renminbi, Taiwan dollars, Hong Kong dollars, and U.S. dollars. We generated most
of our revenues for fiscal 1999 in renminbi since all of our revenues were
derived from our China operations until our acquisition of Sinanet.com in March
1999. In the future, we may also conduct business in additional foreign
countries and generate revenues and incur expenses and liabilities in other
foreign currencies. As a result, we are subject to the effects of exchange rate
fluctuations with respect to any of these currencies. For example, the value of
the renminbi depends to a large extent on China's domestic and international
economic and political developments, as well as supply and demand in the local
market. Since 1994, the official exchange rate for the conversion of renminbi to
U.S. dollars has generally been stable and the renminbi has appreciated slightly
against the U.S. dollar. However, given recent economic instability and currency
fluctuations in Asia, we can offer no assurance that the renminbi will continue
to remain stable against the U.S. dollar or any other foreign currency. Our
results of operations and financial condition may be affected by changes in the
value of renminbi and other currencies in which our earnings and obligations are
denominated. We have not entered into agreements or purchased instruments to
hedge our exchange rate risks, although we may do so in the future.
Although Chinese governmental policies were introduced in 1996 to allow the
convertibility of renminbi into foreign currency for current account items,
conversion of renminbi into foreign exchange for capital items, such as foreign
direct investment, loans or security, requires the approval of the State
Administration of Foreign Exchange, or SAFE, which is under the authority of the
People's Bank of China. These approvals, however, do not guarantee the
availability of foreign currency. We cannot be sure that we will be able to
obtain all required conversion approvals for our operations or that Chinese
regulatory authorities will not impose greater restrictions on the
convertibility of the renminbi in the future. Because a significant amount of
our future revenues may be in the form of renminbi, our inability to obtain the
requisite approvals or any future restrictions on currency exchanges will limit
our ability to utilize revenue generated in renminbi to fund our business
activities outside China.
Our operations could be disrupted by unexpected network interruptions caused by
system failures, natural disasters or unauthorized tamperings with our systems.
The continual accessibility of our Web sites and the performance and
reliability of our network infrastructure are critical to our reputation and our
ability to attract and retain users, advertisers and merchants. Any system
failure or performance inadequacy that causes interruptions in the availability
of our services or increases the response time of our services could reduce our
appeal to advertisers and consumers. Factors that could significantly disrupt
our operations include: system failures and outages caused by fire, floods,
earthquakes, power loss, telecommunications failures and similar events;
software errors; computer viruses, break-ins and similar disruptions from
unauthorized tampering with our computer systems; and security breaches related
to the storage and transmission of proprietary information, such as credit card
numbers or other personal information.
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We have limited backup systems and redundancy. Recently, we experienced an
unauthorized tampering of the mail server of our China Web site which briefly
disrupted our operations. Future disruptions or any of the foregoing factors
could damage our reputation, require us to expend significant capital and other
resources and expose us to a risk of loss or litigation and possible liability.
We do not carry sufficient business interruption insurance to compensate for
losses that may occur as a result of any of these events. Accordingly, our
revenues and results of operations may be adversely affected if any of the above
disruptions should occur.
The law of the Internet remains largely unsettled, which subjects our business
to legal uncertainties that could harm our business.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services covering issues such as
user privacy, pricing, content, copyrights, distribution, antitrust and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for electronic commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on
companies conducting business online. The adoption of any additional laws or
regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our products and services and
increase our cost of doing business.
Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states in
the U.S. are currently reviewing the appropriate tax treatment of companies
engaged in electronic commerce, and new state tax regulations may subject us to
additional state sales and income taxes. Any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could significantly
disrupt our operations.
We may be subject to claims based on the content we provide over our network and
the products and services sold on our network, which, if successful, could cause
us to pay significant damage awards.
As a publisher and distributor of content and a provider of services over
the Internet, we face potential liability for: defamation, negligence,
copyright, patent or trademark infringement and other claims based on the nature
and content of the materials that we publish or distribute; the selection of
listings that are accessible through our branded products and media properties,
or through content and materials that may be posted by users in our classifieds,
message board and chat room services; losses incurred in reliance on any
erroneous information published by us, such as stock quotes, analyst estimates
or other trading information; unsolicited email, lost or misdirected messages,
illegal or fraudulent use of email or interruptions or delays in email service;
and product liability, warranty and similar claims to be asserted against us by
end users who purchase goods and services through our SinaMall and any future
electronic commerce services we may offer.
We may incur significant costs in investigating and defending any potential
claims, even if they do not result in liability. Although we carry general
liability insurance, our insurance may not cover potential claims of this type
or be adequate enough to indemnify us against all potential liabilities.
Privacy concerns may prevent us from selling demographically targeted
advertising in the future and make us less attractive to advertisers.
We collect personal data from our user base in order to understand better
our users and their needs and to help our advertisers target specific
demographic groups. If privacy concerns or regulatory restrictions prevent us
from selling demographically targeted advertising, we may become less attractive
to advertisers. For example, as part of our future advertisement delivery
system, we may integrate user information such as advertisement response rate,
name, address, age or email address, with third-party databases to generate
comprehensive demographic profiles for individual users. In Hong Kong, however,
we would be in violation of the Hong Kong Personal Data Ordinance unless
individual users expressly consented to this integration of their personal
information. The Ordinance provides
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that an Internet company may not collect information on its users, analyze the
information for a profile of the user's interests and sell or transmit the
profiles to third parties for direct marketing purposes without the user's
consent. If we are unable to construct demographic profiles for Internet users
because they refuse to give consent, we will be less attractive to advertisers
and our business will suffer.
We may not be able to adequately protect our intellectual property, which could
cause us to be less competitive.
We rely on a combination of copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy or otherwise obtain and use our technology. Monitoring unauthorized use
of our products is difficult and costly, and we cannot be certain that the steps
we have taken will prevent misappropriations of our technology, particularly in
foreign countries where the laws may not protect our proprietary rights as fully
as in the United States. From time to time, we may have to resort to litigation
to enforce our intellectual property rights, which could result in substantial
costs and diversion of our resources.
We may be exposed to infringement claims by third parties, which, if successful,
could cause us to pay significant damage awards.
Third parties may initiate litigation against us alleging infringement of
their proprietary rights. In the event of a successful claim of infringement and
our failure or inability to develop non-infringing technology or license the
infringed or similar technology on a timely basis, our business could be harmed.
In addition, even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of
operations.
We may be classified as a passive foreign investment company or as a foreign
personal holding company, which could result in adverse U.S. tax consequences to
you.
Based upon the nature of our income and assets, we may be classified as a
passive foreign investment company, or PFIC, or as a foreign personal holding
company, or FPHC, by the United States Internal Revenue Service for U.S. federal
income tax purposes. This characterization could result in adverse U.S. tax
consequences to you. For example, if we are a PFIC, our U.S. investors will
become subject to increased tax liabilities under U.S. tax laws and regulations
and will become subject to more burdensome reporting requirements. We believe
that we were not a PFIC or an FPHC for 1999 or previous years, and we do not
expect to be either in the future. However, the determination of whether or not
we are a PFIC or an FPHC is made on an annual basis, and those determinations
depend on the composition of our income and assets, in the case of the PFIC
rules, and income and shareholders, in the case of the FPHC rules, from time to
time. Although in the past we have operated our business, and in the future we
intend to operate our business so as to minimize the risk of PFIC or FPHC
treatment, you should be aware that certain factors that could affect our
classification as PFIC or FPHC are out of our control. For example, the
calculation of assets for purposes of the PFIC rules depends in large part upon
the amount of our goodwill, which in turn is based, in part, on the then market
value of our shares, which is subject to change. Similarly, the composition of
our income and assets is affected by the extent to which we spend the cash we
have raised on acquisitions and capital expenditures. Therefore, we cannot be
sure that we will not be a PFIC or an FPHC for the current or any future taxable
year.
The possible sale of a substantial number of shares in the public market could
adversely affect the price for our shares.
If our shareholders sell substantial amounts of our ordinary shares,
including shares issued upon the exercise of outstanding options and warrants,
in the public market, the market price of our ordinary shares could fall
dramatically. Currently, approximately 35,000,000 shares are held by our
existing shareholders which may be sold in the public market in the future
pursuant to, and subject to the restrictions of, Rule 144, 144(k), 145 or 701
under the Securities Act. Our directors, executive officers and our principal
shareholders have agreed with our underwriters not to offer, sell, contract to
sell, or otherwise dispose of, directly or indirectly, any ordinary shares, or
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any securities convertible into or exercisable or exchangeable for ordinary
shares for a period of 180 days following our initial public offering. This
period expires on October 9, 2000.
USE OF PROCEEDS
The proceeds from the sale of the Ordinary Shares offered by this
Prospectus are solely for the account of the Selling Shareholders. We will not
receive any proceeds from the sale of these Shares.
PLAN OF DISTRIBUTION
Certain of the Shares covered by this prospectus are restricted and
may not be sold by the Selling Shareholders until these restrictions lapse. We
have a repurchase right with respect to these restricted shares, which right
generally lapses at a rate of 25% on the first anniversary of the date of grant
of the award of the Shares by the Company to the Selling Shareholders and as to
1/48th of the shares each month after the first anniversary, provided that the
holder continues to provide services to the Company as an employee or
consultant. The registration statement registering the Shares for resale is
being filed to enable the Selling Shareholders, if they choose, to sell their
unrestricted Shares in the public market from time to time. All Shares held by
the Selling Shareholders have been included on the registration statement and
are covered by this Prospectus even though some portion of these shares will
continue to be restricted and subject to our repurchase right for some time
following the date of this Prospectus.
It is anticipated that Selling Shareholders who do choose to resell
their Shares may offer the Shares in the manner set forth on the cover page of
this Prospectus, from time-to-time, through broker-dealers or agents designated
by the Selling Shareholders. Any broker-dealer acquiring Shares from a Selling
Stockholder may sell the Shares either directly, in its normal market-making
activities, through or to other brokers on a principal or agency basis, or to
its customers. Any such sales may be at prices then prevailing on the Nasdaq
National Market or other applicable securities exchange, at prices related to
such prevailing market prices, at negotiated prices or a combination of such
pricing methods. The costs of any such sales will be borne by the Selling
Shareholders. The costs of registering the Shares under the Securities Act are
being borne by the Company.
In connection with any sales covered by this Prospectus, the Selling
Shareholders and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act. To the Company's
knowledge, no specific brokers or dealers have been designated by any Selling
Stockholder nor has any agreement been entered into regarding brokerage
commissions or for the exclusive sale of any securities which may be offered
pursuant to this Prospectus.
We have advised the Selling Shareholders that the anti-manipulation
rules under Regulation M of the Exchange Act may apply to sales of the Shares in
the market. We have also informed the Selling Shareholders of the possible need
for delivery of copies of this Prospectus to prospective purchasers. Selling
Shareholders may indemnify any broker-dealer that participates in transactions
involving the sale of the Shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or discounts
or concessions allowed to any such broker-dealers, and, if any such
broker-dealers purchase shares as principal in a transaction, any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act.
Shares being sold pursuant to this prospectus must be sold by the
Selling Shareholders in compliance with Rule 144(e) of the Securities Act, which
limits the amount of securities that can be sold by any one person (and others
whose stock would be aggregated with the stock owned by such person) in any
three-month period to the greater of:
-19-
<PAGE> 21
- 1% of the shares of our outstanding Ordinary Shares as
shown by our most recently filed report or statement we have filed with the SEC;
or
- the average weekly reported volume of trading in our
Ordinary Shares as reported on Nasdaq during the four calendar weeks immediately
preceding the date of receipt of the order to execute the transaction by the
broker or the date of execution of the transaction directly with a market maker.
In addition, any Shares covered by this prospectus that qualify for
sale pursuant to Rule 144 may be sold under that Rule rather than pursuant to
this Prospectus.
SELLING SHAREHOLDERS
The following table sets forth certain information as of September
15, 2000 with respect to the Selling Shareholders. The following table assumes
that the Selling Shareholders sell all of the shares offered by this prospectus.
We are unable to determine the exact number of shares that actually will be
sold.
The number and percentage of shares beneficially owned is based on
40,933,557 shares outstanding at September 15, 2000. Unless otherwise indicated
in the footnotes, each person has sole voting and investment power (or shares
such powers with his or her spouse) with respect to the shares shown as
beneficially owned. Percentages shown are based upon all shares registered
hereunder being sold.
<TABLE>
<CAPTION>
Shares
Shares Beneficially Offered by Shares Beneficially
Position with Owned Prior this Owned After
Selling Shareholder SINA.com to the Offering(1) Prospectus the Offering
------------------- -------- ------------------ ---------- ------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Hong, Jack Vice President, Advanced 536,406 1.31% 150,000
Technology
Lee, Victor Chief Financial Officer 300,565 * 56,250 *
Lin, Frank Hurst Vice President, Business 536,406 1.31% 150,000
Development and General
Manager of U.S.
Operations
Mao, Daniel Chief Operating Officer 900,706 2.20% 900,000
Irvin Sha Irrevocable Living trust of former 30,000 * 30,000 *
Trust 1998 officer
Sha, Jim Former officer 669,442 1.64% 451,666
Sha, Josephine Former officer's 30,000 * 30,000 *
immediate family
</TABLE>
-20-
<PAGE> 22
<TABLE>
<CAPTION>
Shares
Shares Beneficially Offered by Shares Beneficially
Position with Owned Prior this Owned After
Selling Shareholder SINA.com to the Offering(1) Prospectus the Offering
------------------- -------- ------------------ ---------- ------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Former officer's 30,000 * 30,000 *
immediate family
Shy, Yung-Fong
Tsiang, Benjamin Chief Producer and 440,406 1.08% 150,000
General Manager of
Taiwan Operations
Wang, Zhidong President & Chief 1,500,589 3.67% 429,238
Executive Officer
----------------------------------------------------------------------------------------------------------------------------
TOTAL: 4,974,520 2,621,469
</TABLE>
-------------------
* Less than 1%.
While some or all of the Selling Shareholders listed above may be
deemed to be affiliates of the Company, neither the Company nor such
Selling Shareholders admit that the persons listed as Selling
Shareholders are, in fact, affiliates of the Company.
LEGAL MATTERS
The validity of the issuance of the Ordinary Shares offered by this
prospectus will be passed upon by Venture Law Group, A Professional Corporation,
Menlo Park, California, counsel to SINA.com
EXPERTS
The consolidated financial statements as of June 30, 1999 and 2000
and for the years ended June 30, 1999 and 2000 incorporated in this Registration
Statement by reference to the Registration Statement on Form F-1 dated April 12,
2000 and annual reports on Form 10-K filed on September 28, 2000 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Cayman Islands law does not limit the extent to which a company's articles
of association may provide for indemnification of officers and directors, except
to the extent any such provision may be held by the Cayman Islands courts to be
contrary to public policy, such as to provide indemnification against civil
fraud or the consequences or committing a crime. Our Articles of Association
provide for indemnification of officers and directors for losses, damages, costs
and expenses incurred in their capacities as such, except if they acted in a
willfully negligent manner or defaulted in any action against them.
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
-21-
<PAGE> 23
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable as a
matter of U.S. law.
At present, there is no pending litigation or proceeding involving
any director, officer, employee or agent of the Company where indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
-22-
<PAGE> 24
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the SEC are hereby incorporated by
reference:
1. Our prospectus filed on April 12, 2000 pursuant to Rule
424(b) of the Securities Act;
2. All other reports we have filed with the SEC pursuant to
Section 13(a) or 15(d) of the Exchange Act since April 12,
2000, including our annual reports on Form 10-K for the
fiscal year ended June 30, 2000;
3. The description of our Ordinary Shares contained in a Form
8-A filed with the SEC under the Exchange Act on April 12,
2000, including any amendment or report filed for the
purpose of updating such description; and
All documents we subsequently file with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, which documents are deemed to be
incorporated by reference in, and to be a part of, this registration statement
from the date of filing (except that no document shall be deemed to be
incorporated by reference if filed after the filing of a post-effective
amendment which deregisters securities then remaining unsold).
Item 4. DESCRIPTION OF SECURITIES. Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Certain legal matters with respect to the legality of the issuance of
the ordinary shares registered hereby will be passed upon for the Registrant by
Venture Law Group in Menlo Park, California. As of the date of this Registration
Statement, attorneys of Venture Law Group shares and an investment partnership
associated with Venture Law Group own 41,205 shares of the Company's ordinary
shares.
Item 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Cayman Islands law does not limit the extent to which a company's
articles of association may provide for indemnification of officers and
directors, except to the extent any such provision may be held by the Cayman
Islands courts to be contrary to public policy, such as to provide
indemnification against civil fraud or the consequences of committing a crime.
The Registrant's Articles of Association provide for indemnification of officers
and directors for losses, damages, costs and expenses incurred in their
capacities as such, except if they acted in a willfully negligent manner or
defaulted in any action against them. In addition, the Registrant has entered
into Indemnification Agreements with our directors and officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, we have been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable as a matter of U.S. law.
At present, there is no pending litigation or proceeding involving
any director, officer, employee or agent of the Company where indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable.
-23-
<PAGE> 25
Item 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number
------
<S> <C>
5.1 Opinion of Venture Law Group, a Professional Corporation.
23.1 Consent of Venture Law Group, a Professional Corporation (included in Exhibit 5.1).
23.2 Independent Accountants' Consent (see p. 29).
24.1 Powers of Attorney (see p. 26).
</TABLE>
Item 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) that, for purposes of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as the indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in a successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the question has already been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
[Signature Pages Follow]
-24-
<PAGE> 26
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, SINA.com, a corporation organized and existing under the laws of
Cayman Islands, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Sunnyvale, State of California, on October 11,
2000.
SINA.com
By: /s/ Victor Lee
------------------------------------
Victor Lee
Chief Financial Officer
-25-
<PAGE> 27
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Victor Lee and Charles Chao, jointly and
severally, his or her attorneys-in-fact and agents, each with the power of
substitution and resubstitution, for him or her and in his or her name, place or
stead, in any and all capacities, to sign any amendments to this Registration
Statement on Form S-8, and to file such amendments, together with exhibits and
other documents in connection therewith, with the Securities and Exchange
Commission, granting to each attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as he or she might or could do in
person, and ratifying and confirming all that the attorneys-in-fact and agents,
or his or her substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Daniel Chiang
------------------------------------
Daniel Chiang Chairman of the Board October 11, 2000
/s/ Zhidong Wang
------------------------------------
Zhidong Wang Chief Executive Officer and President (Principal October 11, 2000
Executive Officer)
/s/ Victor Lee
------------------------------------
Victor Lee Chief Financial Officer (Principal Financial October 11, 2000
Officer)
/s/ Charles Chao
------------------------------------
Charles Chao Vice President, Finance (Principal Accounting October 11, 2000
Officer)
/s/ Pehong Chen
------------------------------------
Pehong Chen Director October 11, 2000
/s/ Lip Bu Tan
------------------------------------
Lip-Bu Tan Director October 11, 2000
/s/ Ter Fung Tsao
------------------------------------
Ter Fung Tsao Director October 11, 2000
</TABLE>
-26-
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number No.
------ ---
<S> <C> <C>
5.1 Opinion of Venture Law Group, a Professional Corporation 28
23.1 Consent of Venture Law Group, a Professional Corporation 28
(included in Exhibit 5.1)
23.2 Consent of Independent Accountants 29
24.1 Powers of Attorney 26
</TABLE>
-27-
