Renren (RENN) Looking to Make IPO Splash

1:15pm (EST)

Every once in a while we get excited about Initial Public Offerings (IPO’s) because they are stock offerings on good or great companies which allow you to invest in them. Of course, the ones with the best prospects are hard to get in to as many of the brokerage firms offer them to the wealthier investors. The run-of-the-mill IPO’s can be had on the cheap and some IPO’s are simply overhyped, undervalued, or somewhere in between.

We aren’t sure where Renren lies but China’s largest social network will be going public this week in hopes of raising up to $750 million. The Facebook clone hopes to boost its profile with 53 million American Depositary Receipts (ADR’s) at $12-$14 and will trade under the ticker symbol “RENN”. Expectations are already up as original prices called for a range of $9-$11 a share.

If shares are priced in the upper range, it is possible Renren would be valued at nearly triple that of Facebook. In 2010, Renren had revenue of about $75 million but a net loss of $60 million. Renren has nearly 120 million registered users but the biggest difference between the two? Facebook is currently banned in the world’s second-largest economy but is trying to get in the back door through Baidu (BIDU, $141.37, down $6.10).

While there is risk in the Chinese internet sector, Renren seems like the sharpest tool in the shed. With the market getting increasingly competitive, there are more than 100 social networking sites operating, Renren could command an even higher premium.

We won’t be buying the hype though but instead we will wait a few months to see if there is an option trade. IPO’s don’t normally list options during the first few weeks or months of trading and sometimes when they do become available, they are thinly traded or have super inflated premiums.

As far as the market action for today, things are tight. The Dow is up 2 points to 12,809 while the S&P is down 5 points to 1,356. The Nasdaq, however, is getting punished for a loss of 25 points and is at 2,839. Subscribers, check the Members Area for some more thoughts on our current trades.

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Renren (RENN) Looking to Make IPO Splash

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