Sina.com enslaved to ousted founder

By CNN's Kristie Lu Stout and reports

HONG KONG, China (CNN) -- Though Sina.com has shut its founder Wang Zhidong out of the boardroom, he remains a key investor in the Chinese company that operates the portal.

A posting on Sina.com said the board unanimously ruled to end Wang's involvement as chief executive, president and board member of the leading Chinese Web portal.

But the ousted founder still retains majority ownership of the Mainland Chinese company that supplies Sina.com with content.

Since China prohibits foreign investment in Internet content providers, or ICPs, portal companies must spin off their content production units before listing overseas.

Before its Nasdaq listing last year, Sina.com spun off its portal and placed it under the control of the wholly Chinese-owned company, Sina Internet Information Service (SIISC).

Wang holds a 70 percent stake in SIIC, which owns the licenses to operate the Sina.com site.

Tensions overheating

"It's going to be a problem, since he's a major shareholder in the Chinese company," said IDC's Beijing-based tech analyst Matthew McGarvey.

"It's a major obstacle for all companies involved, especially with this sort of row becoming public at this point. The tensions and voices are beginning to overheat," McGarvey said.

Wang told a news conference on Tuesday that he was "utterly shocked and confused" by a sequence of events this month that culminated with his forced exit from the company.

"I never intended to resign as CEO, president and board member of Sina.com, nor did I sign any related documents," said Wang at the news conference.

"I feel utterly shocked and confused by this act of Sina.com's board members. I doubt the legitimacy of the action by Sina.com board members to force me from my positions."

"I have asked my lawyer to study the issue," he added.

Chief operating officer Daniel Mao replaced Wang Zhidong as CEO while general manager Wang Yan was promoted to president.

Analysts say Wang was forced to move aside so a more suitable CEO could take the reins of the company as it woos potential buyers.

Sina.com has yet to respond to the fact that the ousted founder is the main investor in the company that is critical to the portal's legal operations in China.

"Nobody wants to talk about it at this point -- it's like the crazy aunt in the closet," IDC's McGarvey told CNN.

"Until they realize the implication of that and how it can be excised, no one wants to talk about it."

Sina.com closed down 4.7 percent to hit $1.81 on Wednesday.