China Social Network ‘RenRen’ To Launch IPO

 

RenRen, China’s most trafficked social network will launch an IPO on the New York Stock Exchange on Wednesday, an IPO that is expected to raise $734.4 million and value the company at approximately $5 billion.

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Renren is offering shares at $12 to $14, a 30% increase over its suggested offering of $9 to $11 per share just one week ago.

If the company reaches the $13 mid-point it will have a valuation of $5.1 billion, not bad for a company that has only 117 million users of which only 31 million actually access the site at least one-time per month.

RenRen is in many ways a Facebook clone, when Facebook announced a “Like” button, RenRen shortly followed suit, when Facebook announced Groups, RenRen again jumped onboard. The one big difference is that RenRen charges brands upwards of $90,000 to create a fan page, an offering made available by Facebook for free.

In an interview with the BBC Mark Natkin of Marbridge Consulting said:

“The appetite for Renren shares is there because this is the first major social networking site from anywhere to list.”

Unlike Facebook the company is not profitable at this time and the SEC will investigate the social networks accounting practices thoroughly as they are currently doing for various Chinese listed company’s. In fact the company over the last week has come under intense scrutiny, according to the Wall Street Journal:

Renren is coming to market amid a string of data and accounting-related issues raised in the past week. On Tuesday, Renren’s audit committee head said he had resigned, following Citron Research’s allegations last week of financial fraud at his own company, Longtop Financial Technologies Ltd. (LFT).

The company has also been criticized for falsifying new user numbers in 2011. RenRen officials originally announced that 7 million users were added in the first quarter, bringing site totals to 31 million monthly users, however they recently amended their numbers to 5 million new users in the first quarter and 2 million in the previous fourth quarter, a sharp decline from originally revealed numbers.

Despite various accounting concerns and a user base that is easily dwarfed by Facebook the company’s IPO is still considered a hot ticket for the tech obsessed investors crowd, particularly because it will be the first IPO of it’s kind.

 

 

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