Friday 6 May 2011

Renren IPO a sighter for Facebook

Renren IPO a sighter for Facebook -image - BDFM Online
Chinese Social Networking zone Renren’s successful public offering may be a prelude to Facebook IPO as
Published: 2011/05/05 11:14:45 AM


Renren’s successful IPO could be the curtain raiser for what is to come if the world’s No. 1 social networking site, Facebook, goes public next year.


Shares of Renren Inc, one of the biggest social networking companies in China, surged 28,6% in their debut on Wednesday.


Strong demand for the unprofitable company — which will make money "very soon," according to Chief Executive Joseph Chen — is the latest sign investors are eager to snap up stock in social media companies.


The stock rose as high as $21,93, or almost 56,6% above its $14 IPO price, in its first day of trading on the New York Stock Exchange before closing at $18,01. Earlier on Wednesday, Renren raised $743,4 million in its IPO.


Renren’s offering comes amid a grab for hot social media companies, including Twitter, Facebook, Groupon and Zynga, which are propped up by multibillion-dollar valuations of their shares trading on the secondary markets.


Facebook has a market value of around $70 billion, based on a share sale currently being contemplated, making it worth more than companies such as Boeing Co.


Renren shares are trading at slightly more than 80 times annualized sales for the six months ended Dec. 31, 2010, estimates IPOdesktop.com President Francis Gaskins. That’s well above Facebook, valued at 35 times last year’s sales in gray market trading.




Investors in Renren seemed to brush aside recent concerns dogging the company, including questions about its internal financial controls, the resignation of its audit committee chairman and the tight control and censorship of the Chinese government.


If Renren fails to comply with Chinese government Internet regulations, its websites could be shut down, according to the risk factors section of its prospectus.


Renren — whose name means "everyone" in Chinese — has also faced questions about the number of users it has.




The company, in an amended IPO filing on April 27, had to revise the number it said it had in December 2010. According to the revised filing, Renren’s monthly unique log-in user base grew by only 5 million, or 19%, in the first quarter of 2011 — not the 7 million, or 29%, it previously reported.


Renren’s IPO gave it a market value of $5,7 billion, according to an underwriter. It closed out its first day of trading with a market value of $7,4 billion.


Renren had net revenue of $76,5 million in 2010 and about 117 million activated users as of March 31, 2011. It had about 31 million monthly unique log-in users in March 2011.


Beijing-based Renren sold 53,1 million American Depositary Shares for $14 each on Wednesday. It had planned to go public for $12 to $14 per share after raising its estimated price range by 30% last week from $9 to $11.




REUTERS


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