Renren IPO raises $743 million

Ronny Kerr · May 4, 2011 · Short URL:

The first social networking site to go public in the United States sees its shares surge to $24

Chinese social networking website Renren went public on the New York Stock Exchange on Wednesday, raising $743 million for the Beijing-based company.

Shares, trading under the ticker “RENN,” surged by about $4.96 or 35.39 percent to $18.95, based on numbers noted at 12:30 pm ET., though earlier the stock had risen as high as $24. Volume was nearing 60 million shares.

Morgan Stanley, Deutsche Bank Securities and Credit Suisse led Renren’s IPO. Other underwriters include BofA Merrill Lynch, Jefferies, Pacific Crest Securities and Oppenheimer & Co.

Renren has attracted quite a bit of attention, not just because the IPO offers more evidence of the slowly recovering public market, but also because the company is the first social networking website to go public in the United States.

Despite the inevitable comparisons to its United States counterpart, with some going so far to call it the “Facebook of China,” Renren does not yet approach Facebook in scale. While the company reported having 117 million users, according to its prospectus, it later disclosed that only 31 million of those were monthly active users. That’s just a small fraction of Facebook’s 600 million users worldwide.

Investors are likely banking on promises from Renren that it can expand hugely in its home country after a healthy IPO. China was home to 457 million Internet users at the end of last year and half used social networking sites, so the market is clearly there.

Renren also differs significantly from Facebook in that social gaming, and its monetary benefits, are more deeply integrated into the company. As evidence of this, 42 percent of Renren's revenues come from advertising and 45 percent comes from social gaming. A much larger percentage of Facebook’s revenues are believed to come from advertising.

The largest shareholders in Renren include Softbank, which owns about 405.4 million shares (about 40 percent of the company pre-IPO), company founder and CEO Joseph Chen, who owns about 283.3 million shares (about 27.7 percent pre-IPO), and General Atlantic, which owns about 54 million shares (about 5.3 percent pre-IPO).

Softbank is not unloading any shares, but Chen and General Atlantic are selling around 13 million and 13.5 million, respectively.

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