5/5/11

Renren. A name that most non-financial industry affiliated Americans have not heard before yesterday. I would even be willing to bet that many WSO users had never heard of The Chinese Facebook before yesterday. In a nutshell, Renren offers games and daily deals to users and is the first Chinese social-networking site to go public in the U.S.

China's biggest social-networking website made a splash with an eye-popping valuation. Neither because of the share price or IPO amount, but certainly due to the forward looking implications:

The Beijing-based company sold 53.1 million American depositary receipts at $14 each, the high end of the proposed range. The stock rose $4.01 to $18.01 as of 4 p.m. Including the sale of 7.97 million ADRs sold through an overallotment option with underwriters, Renren's IPO raised $855 million. At its $14 initial price, Renren would be valued at 72 times last year's sales, compared with 25 times for Facebook.

The successful leveraging of social networks demonstrated by Facebook is leading to massive speculation in what is quickly becoming its very own sector.I for one am more than a bit concerned by this rampant speculation in social networks. I have heard all of the arguments for why the valuations are warranted. I begrudgingly accept many of those arguments with regards to Facebook due to the audience it targets. I am, however, highly skeptical of the notion that Chinese social networking companies should receive 3x higher valuations when the purchasing power of their audience is still an unknown commodity.

I see a lot of similarities with the original tech bubble beginning to form. With the dwindling opportunities for foreign investments in China, is this just another method of market actors trying to speculate on China? Or is this perhaps the beginning of a fruitful trend that will bring greater transparency to the Chinese economy and balance to the global economy as a whole?

Any Renren buyers out there? I would love to hear your thoughts on the subject.

Comments (14)

5/5/11

I can't tell which is a bigger scam - social media valuations, or the "cloud".

5/5/11

Just spent $42,000 on Ren Ren

5/5/11

We're definitely in the early stages still--there haven't really been any comparable offerings or precedent transactions to aid in the valuation. How can we even say it's a bubble if we don't have any idea how much Facebook is even worth?

Metal. Music. Life. www.headofmetal.com

5/5/11

As a Chinese student who has studied in US for the past 5 years, I think that there are some differences between renren and facebook. In US, in my mind, everybody uses facebook. However, renren was mainly used by students, mostly i knew are high-schoolers or college students. One of the reason i think is because that renren used to call "xiaonei", which means " within the campus" in Chinese.

So for me, I think give a direct parallel comparison between Facebook and Renren was not very appropriate. I think renren is relatively overvalued.

5/6/11
PEstarter:

As a Chinese student who has studied in US for the past 5 years, I think that there are some differences between renren and facebook. In US, in my mind, everybody uses facebook. However, renren was mainly used by students, mostly i knew are high-schoolers or college students. One of the reason i think is because that renren used to call "xiaonei", which means " within the campus" in Chinese.

So for me, I think give a direct parallel comparison between Facebook and Renren was not very appropriate. I think renren is relatively overvalued.

Facebook was originally started for students.

Someone made a good point that Renren already has its users paying for weird shit, but that's not going to stop the competition from beating the shit out of Renren. Facebook's been in talks with Baidu and a third party to create a social networking website in China. Renren's valuation is a complete joke.

5/10/11
PEstarter:

As a Chinese student who has studied in US for the past 5 years, I think that there are some differences between renren and facebook. In US, in my mind, everybody uses facebook. However, renren was mainly used by students, mostly i knew are high-schoolers or college students. One of the reason i think is because that renren used to call "xiaonei", which means " within the campus" in Chinese.

So for me, I think give a direct parallel comparison between Facebook and Renren was not very appropriate. I think renren is relatively overvalued.

Facebook was also first used by college kids.

The problem that you see with Renren simply reflects that social media has not become conventional yet in China and it lacks of the vision for educating everyone in China to become social-media-oriented.

5/5/11

I cant believe the US allowed them to sell even one percent of that S**t faced company on US soil... It's basically a copy and paste of facebook, the layout, codes etc. Its even blue and white. To sum it up, just imagine facebook with the language changed to chinese. Plus the chinese government wont let facebook operate in china. The US needs to grow some balls and step up to china.

P.S: Rembini should float

5/5/11
monkeyDD:

I cant believe the US allowed them to sell even one percent of that S**t faced company on US soil... It's basically a copy and paste of facebook, the layout, codes etc. Its even blue and white. To sum it up, just imagine facebook with the language changed to chinese. Plus the chinese government wont let facebook operate in china. The US needs to grow some balls and step up to china.

P.S: Rembini should float

haha except that they're still stuck in the old fb layout
but yeah otherwise, complete ripoff in every shape and form

5/5/11
cartman:
monkeyDD:

I cant believe the US allowed them to sell even one percent of that S**t faced company on US soil... It's basically a copy and paste of facebook, the layout, codes etc. Its even blue and white. To sum it up, just imagine facebook with the language changed to chinese. Plus the chinese government wont let facebook operate in china. The US needs to grow some balls and step up to china.

P.S: Rembini should float

haha except that they're still stuck in the old fb layout
but yeah otherwise, complete ripoff in every shape and form

+ extensive privacy infringements that would make the NSA jealous :)

Get busy living

5/5/11
cartman:
monkeyDD:

I cant believe the US allowed them to sell even one percent of that S**t faced company on US soil... It's basically a copy and paste of facebook, the layout, codes etc. Its even blue and white. To sum it up, just imagine facebook with the language changed to chinese. Plus the chinese government wont let facebook operate in china. The US needs to grow some balls and step up to china.

P.S: Rembini should float

haha except that they're still stuck in the old fb layout
but yeah otherwise, complete ripoff in every shape and form

Except they're already getting people to pay for shit like having background music and etc... I feel like people in China are more addicted to Renren than people here to FB. The only problem is they're never going to get huge like FB because they don't have the vision...

I don't accept sacrifices and I don't make them. ... If ever the pleasure of one has to be bought by the pain of the other, there better be no trade at all. A trade by which one gains and the other loses is a fraud.

5/6/11

You guys realize Facebook is blocked in China, right? How is this for state-sponsored capitalism?

5/6/11

I read that RENN changed its user base growth percentage from 29% to 19% days before its IPO, its independent chairman for internal audit also resigned.....

Hasn't it been also loosing money for the past couple of years (net loss of $64mm in 2010 and $ $70mm in 2009)?

5/6/11

No first mover advantage = short this shit.

It's already down from it's first day high by a good amount. I heard a story that the original offering to bookrunners was in the 9-11 range and the "____ OF CHINA" narrative we've gotten crammed down our throats since December boosted it to 12-14 range.

Sell-side just dumped it on the retail class that wanted a piece of the action with FB but were either not GS clients or were too fucking dumb to keep their mouths shut during that whole deal.

Who says you can't make an easy buck on the street anymore?

"Dude, not trying to be a dick here, but your shop looks like a frontrunner for the cover of Better Boilerrooms & Chophouses or Bucketshop Quarterly."

-Uncle Eddie

5/10/11

Get busy living

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