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Jim Trippon is an Amazon.com bestselling business and finance author, a practicing CPA, and a fee based investment advisor. His portfolio of companies includes J.M. Trippon & Company CPA, Trippon Wealth Management & Trippon Financial Publishing. Jim has dedicated his business career to... More
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Trippon Financial Research, Inc.
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Global Profit$ Alert
My book:
Stay Rich Forever: Retirement Planning Secrets of Millionaires and How They Can Work For You!
  • China's IPO of the Year. Explosive Gains or Idle Chatter? 1 comment
    Feb 24, 2011 10:57 AM | about stocks: YOKU, DANG
    The most anticipated IPO in the world has got to be Facebook. With 500 million users, Facebook has been valued somewhere between $50 billion and $63 billion dollars. How will the market actually value the world's best-known social networking site? That is the $64 billion dollar question.

    A Facebook IPO may not happen until 2012.

    But now we're seeing reports that China will be first out of the gate with a public offering of its own Facebook equivalent. It's a site called Renren.com, meaning "everyone" in Chinese.

    Renren's debut is expected to raise about $500 million, in an offering managed by Deutsche Bank, Morgan Stanley and Credit Suisse.

    That is a very, very cheap offering compared to the estimated value of Facebook.

    Although China has the biggest Internet base in the world, with about 457 million users, Renren is still a lot smaller than Facebook. The Chinese site has about 160 million registered users but that number is rising.

    Renren says its revenues are also rising. But the firm won't give out any exact numbers just yet. Renren does report that advertising revenues have more than doubled each year since the website began selling space in 2008.

    Advertising on the Internet in China brought in about $3.9 billion last year according to Susquehanna International. The consulting firm says Internet ad revenues will triple to almost $13 billion by 2014. And Chinese social networking firms are expected to take up the lion's share of new revenue gains.

    How tempted should U.S. investors be? Facebook is blocked in China. That means there is effectively no competition for ownership of China's biggest social network.

    Take a Warning from the Past

    News reports on the Renren IPO have been almost breathless with excitement.

    Britain's Guardian recalls that Baidu, China's answer to Google, has been listed on the NYSE since 2005 and its shares have risen 4,660% to date.

    Also, the Chinese copy of YouTube, Youku.com (NYSE:YOKU), was listed on the NYSE in December. Its shares closed up 161% on the first day of trading "and have performed well since".

    Not so fast. Investors who didn't have early access to the IPO may have missed the run-up and bought at the top of the market, only to suffer a huge price setback.

    Youku Stock Performance Since IPO

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    As you can see from the performance chart, only early IPO investors had a chance to make significant profits, if they were alert enough to get out early.

    Another Chinese mimic of an American website came to market at the same time. Dangdang (NYSE:DANG) is meant to be the Chinese version of Amazon.com. The Guardian reports that shares in Dangdang "jumped 87% on the first day and have continued to increase in value".

    Really?

    Dangdang Stock Performance since IPO

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    You don't have to be Warren Buffett to see that investors with early access to the IPO made a killing. But latecomers have had a much harder time with this stock.

    The Wall Street Journal reports that four of the five best IPOs to hit U.S. markets last year were Chinese offerings. Among them were: "Youku.com's 161 percent pop!" Yes, I suppose it was a great IPO if you had access to shares at the offering price.

    The Journal quotes analysts at Dealogic as saying, "The worst five debuts also came from China-based companies, with mobile application company Ski-mobi Ltd. skidding 25% on its first day in December."

    In short, there appears to be a whole lot more risk than reward for retail investors in newly listed Chinese companies. Even investors with early access to new listings haven't been guaranteed a quick profit.

    Yes, it is too early to turn our backs entirely on Renren. I'll be waiting eagerly to see Renren's earnings and revenue projections when they are released.

    After all, it would be a shame to miss out on the next Baidu. But stock markets and investor attitudes towards China have changed a great deal since that firm was listed back in 2005.

    For now, the watchword is caution.

    Click HERE to know more about the China Stock Digest: China Stock Market Research & China Stock Analysis
    What stocks is the "Warren Buffett of China" into now?

    Jim Trippon, Publisher of China Stock Digest, has been called the "Warren Buffett" of China because he just seems to have a knack for unearthing the most undervalued stocks in that country.

    He provided a hefty 39% return to his subscribers in 2007, 58% in 2007, and is up 48% over the past 3 years in the worst market since the Great Depression.

    The best part? He sees even better profit potential this year.

    Click HERE for the exciting details...


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    Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.

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  • yokuisoverpriced
    , contributor
    Comments (2) | Send Message
     
    Would you still be recommending Bidu and SINA?
    26 Mar 2011, 09:15 AM Reply Like
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