One of the largest social networks in China, Renren, is on track to go public on Wednesday, in one of the most highly anticipated offerings to come out of China this year.
The Beijing company, which is offering 53.1 million American depository shares, expects to price its shares between $12 to $14, according to its latest filing. At the top of that range, the company stands to raise $743.4 million.
Often described as the “Facebook of China,” Renren is expected to generate significant investor interest. The company, which will list on the New York Stock Exchange under the ticker “RENN,” is riding two dominant trends: the rise in social networking and China’s booming Internet market. China recorded 457 million Internet users at the end of last year, according to government research firm China Internet Network Information Center.
“Renren is attracting a lot of interest because investors are looking for long term winners in the Chinese Internet space,” said Nick Einhorn a research analyst with Renaissance Capital of Greenwich, Conn.
Renren is the largest “real name” social network in the country, with about 117 million users, it also has a daily deal site called Nuomi. Still, it operates in a crowded field and it does not enjoy the kind of dominance that Facebook has in the United States. Facebook, which was valued at $50 billion in a recent investment round, has more than half a billion active users worldwide and is said to have had about $2 billion in revenue last year.
In contrast, Renren recorded revenue of $76.5 million in 2010, a 63.9 percent increase from the previous year. It posted a loss of $64.2 million last year. The company, according to Mr. Einhorn, also recorded a sequential dip in advertising revenue for the fourth quarter of 2010 — a troubling sign for a start-up that should be enjoying a growth spurt.
Analysts have also raised concerns about the level of activity on the site, although its user base is substantial, less than a third logged onto the site in March, according to a recent filing.
“The question is how they monetize, their growth has not been as strong as it could have been,” Mr. Einhorn said.
Renren has also come under fire, in recent months, for issues related to accounting. In April, the company initially reported a growth of 7 million monthly unique logins for the first quarter but later had to revise that figure down to 5 million. Separately, the chief of Renren’s audit committee, Derek Palaschuk, stepped down last week, amid accusations of accounting fraud at Longtop Financial Technologies (where he has been a chief financial officer since 2006).
Yet, despite the cloud of concern, Renren is expected to fare well in the public markets on Wednesday. China’s Youku, an online video company that went public last December, is now trading above $55 a share — more than quadruple its initial price.
“Renren’s strong pricing and performance is reflective of the markets strong interest in all things social and the dearth of quality product to satiate that thirst,” said Lou Kerner, an analyst with Wedbush Securities.
The company is putting 42,898,711 shares up for sale, while existing shareholders are offering 10,201,289 shares. Renren’s major shareholders include Softbank, which will own a 34.4 percent stake after the offering, private equity firm General Atlantic and venture capital firm DCM. Chief executive Joseph Chen is selling about 13 million shares, which will leave him with a 22.9 percent stake after the offering.
Renren has hired Deutsche Bank Securities, Morgan Stanley and Credit Suisse to act as underwriters for its I.P.O.
