Renren Inc. (NYSE: RENN), often called “The Facebook of China,” has finally priced its initial public offering. Due to the restated growth targets of last week and then due to the head of the audit committee resignation just yesterday, we are having a hard time jumping on the enthusiasm train. The offering was supposed to price late yesterday.
The social networking internet platform in China sold some 53,100,000 ADRs and each ADR represents 3 Class A ordinary shares. The price came at $14.00 per shares for gross proceeds or $743.4 million.
Some 42,898,711 ADRs are being sold by Renren and 10,201,289 ADRs are being sold by selling shareholders. Morgan Stanley, Deutsche Bank, and Credit Suisse were the global coordinators, BofA Merrill Lynch and Jefferies & Company were the joint book-runners; and co-managers are Pacific Crest Securities LLC and Oppenheimer & Co. Inc. acted as co-managers, for the offering. The underwriters were granted a 30-day overallotment option to buy up to an additional 7,965,000 ADRs at the same IPO terms.
Renren founder Joseph Chen will still be the majority shareholder after this IPO. We originally had a range expected of $9 to $11 and this range was raised finally to $12 to $14 per share.
Our biggest concern is that Chinese companies have been under a flag due to a blurring of fact and fiction when it comes to company numbers and finances. Just last week came word that the company had geared down its growth numbers. Then yesterday came word that the head of its audit committee had resigned.
It is very possible that all of he concerns are just overblown. It is also possible that they are not. The Facebook-craze on Wall Street is driving investors to try to get their hands on anything social. Our concern is over what price as the knock-off of Facebook is being valued at revenue multiples that are about twice that of the real Facebook.
We might be cautious, but the market is not. The first price indication was $18.00 before the opening bell, but that may change and we’ll be making updates throughout the day. Hopefully Renren won’t become “Redrum.”
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JON C. OGG