Last updated: May 5, 2011 8:02 am

Renren shares soar 30% on NY debut

Renren, China’s leading real-name social networking service, saw its shares surge 30 per cent on its trading debut in New York.

The Beijing-based company, which is unlisted in China, priced its initial public offering at $14 per share to raise $743m, at the top of its projected range of $12-$14.

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The shares initially rose to $24 in trading on Wednesday but closed at $18.01, a rise of 28.6 per cent. .

The sale of 53.1m of US-listed Renren shares, or American depositary receipts, confirmed strong investor demand in spite of doubts over the reliability of some Chinese listing candidates’ financial data and valuation multiples.

Renren’s valuation multiple is more than twice that of Facebook in private markets.

The offering is the largest this year by a Chinese technology company on the New York Stock Exchange. It is also the first by a social media group, ahead of expected offerings this year by others including LinkedIn, which said in a filing on Wednesday that it would list on the NYSE.

Renren’s post-IPO value, currently at $7.5bn, puts it at a greater valuation versus 2010 revenues than Facebook’s valuation in the private shares market, though it has a much lower total enterprise value.

Facebook was valued at $65bn by institutional shareholders at the end of March, according to figures from Nyppex, a private share-trading market, which was about 32 times projected 2010 sales of $2bn.

Renren, at a market value of $7.5bn, is valued at nearly 100 times last year’s net revenues of $76.5m, which strips out rebates to advertisers commonly paid in China.

“People who are bullish on Renren are looking at where this company could be eventually,” said Nick Einhorn, analyst at Renaissance Capital, an IPO advisory and investment group. “At about a 10th of the market value of Facebook, that reflects how likely it is Renren could get to the Facebook ballpark.”

Renren was set up as a Facebook clone but has since evolved beyond that model as its features and monetisation have adapted to the Chinese market.

Although Facebook has said it is exploring ways of entering China, the site remains blocked in the world’s most populous internet market.

But Renren’s status in the Chinese market is not as unrivalled as Facebook’s elsewhere.

Tencent, the company operating the world’s largest instant messaging service and one of China’s strongest social media companies, has a real-name service called Pengyou, or Friends, which could rival Renren.

Renren’s first-day share performance lagged that of other hotly sought-after Chinese groups. Last year, shares in Youku, a streaming video service, surged 147 per cent, the most of any US listing since 2007

“The concerns about the company may have had some negative impact but clearly not much,” said Mr Einhorn. “Renren priced in its range because bankers already had Youku as a guide.”

Renren’s underwriters were Morgan Stanley, Deutsche Bank and Credit Suisse.

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