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RenRen (RENN) IPO

Foreword
 
 “China Internet IPO”, “Social Network“, and “Facebook” are the hottest buzz words of 2011. Renren includes all 3 of those elements and will be one of the first social network websites going IPO with Linkedin, Facebook, and Kaixin001 following after. Renren is a China Internet Social Network company designed to look like the Facebook of China and is going IPO on Wednesday, May 3, 2011. China has 457 million Internet users at the end of 2010 and is estimated to grow to over 700 million by 2014. Renren has 114 million registered users. The wave of hot IPOs has evolved from US Tech. firms in the 1990s to the US Internet IPOs in the 2000s to the China Internet IPOs in the 2005-2010 to the Global Social Media + China Internet Social Media in 2011. As an early adopter and user of various Internet Social Networks, I have experience the evolution of sites such as Friendster, Myspace, Facebook, Linkedin, and now the China Websites and Social Networks such as Renren as I am currently based in Shanghai, China. The recent China Internet IPOs from Dec. 2010 such as Dang Dang (Dang), Yokou (Yoku), and Qihoo (NYSE:QIHU) have been successful for institutional investors, 45% to 366% return from IPO price to May 3rd while the return for investors after the open IPO price has been mixed from -5% to 121%. More data are provided in the following report. The information from this research report has been taken from the Renren prospectus and various reputable sources in English and Chinese as well. We hope this report will better help you in your investment decision, business decision, or academic interests by providing you with an overview of Renren as a company and the social network in China as well. 

Executive Summary
 
 
   Price per share: $12-14 (increase from previous $9-11)
   114 million registered users (February 2011)
o   Aggregate 2.9 billion photos, 249 million blogs, 20.8 billion comments/reviews
   58.2% of Chinese internet users below the age of 30
   Users in China spent 7.8% of their online time on social networking sites compared to 13.9% globally and 11.6% in the United States (April 2010)
   YoY revenue growth was 239% from 2008-2009
   YoY revenue growth declined to 64% in 2009-2010
   Company has no debt and over $136M in cash on balance sheet
   Revenue breakdown
   Renren potentially has large upside from increasing its product offerings and monetization its services
   Risk factors include intellectual property, user base, innovation, technology, reputation, and regulation
   Management has strong engineering, tech start-up and consulting backgrounds
   Competitors include Kaixin001, Weibo, Pengyou, and Facebook

IPO Details
 
   RenRen expected IPO date: May 4, 2011.
   RenRen ticker symbol: NYSE:RENN
   Price per share: $12-14 (increase from previous $9-11)
o   Raising up to $743.1 million
o   15.93% to 18.59% of the company will be floating
   Shares offered
o   ADSs by Renren: 42,898,711
o   ADSs by current shareholders: 10,201,289
o   Total ADSs offered: 53,100,000
o   ADSs to Class A ratio: 3ADSs to 1 Class A share
   Private Placements
o   Third-party investors affiliated with Alibaba Group, China Media Capital, and CITTIC Securities to purchase an aggregate USD 10 million worth of Class A shares at IPO price with respect to the ADSs to Class A ratio
 
Renren User Base & Internet Demographics in China
   Renren User Base
       114 million registered users (February 2011)
       31 million active users
o   Aggregate 2.9 billion photos, 249 million blogs, 20.8 billion comments/review
 
 
   Internet Demographics in China
o   58.2% of internet users below the age of 30
o   Students comprise 30.6% of the total user population
o   Only 38.4% of internet users in China engaged in online social networking compared to 69.8% globally and 81.4% in the United States (April 2010)
o   Users in China spent 7.8% of their online time on social networking sites compared to 13.9% globally and 11.6% in the United States (April 2010)
 
 
Kenny Hong, CFA
Vice President, Investment Advisory
Kenny.hong@ct-business.com

Email me and ask about the full report! 
 
 
 
 
 
 
 



Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RENN over the next 72 hours.