China’s Largest Social-Network Site Said to Plan IPO

February 19, 2011, 11:43 AM EST
Source: Bloomberg Business Week
By Serena Saitto and Brian Womack

Feb. 19 (Bloomberg) -- Renren.com, China’s largest social- networking service, is preparing for a U.S. initial public offering of about $500 million this year, according to three people with knowledge of the plan.

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The banks handling the IPO are Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG, according to the people, who declined to be identified because the matter isn’t public. The offering could come by June, two of the people said.

Renren.com has more than 160 million registered users, according to Analysys International in Beijing. The site could use the IPO proceeds to woo more visitors as it competes with local rivals Tencent Holdings Ltd. and Baidu Inc. in the world’s most populous Internet market. Renren -- a name that means “everyone” in Chinese -- has similar features as Facebook Inc., which is blocked in China.

No U.S. social-networking sites have gone public, even as their popularity and advertising revenue soar. That’s created pent-up demand among investors. LinkedIn Corp., which announced plans last month to raise $175 million in an IPO, could become the first to go public.

At Renren, advertising has more than doubled each year since the site started selling space in 2008, the company said in a statement. The online advertising market will triple to almost $13 billion in China by 2014, estimates Susquehanna International Group LLP.

‘Inside School’

Lillian Wang, a public-relations manager at Renren in Beijing, didn’t immediately return calls to her office and mobile phone seeking comment after working hours.

Pen Pendleton, a spokesman for Morgan Stanley, declined to comment, as did Credit Suisse’s Duncan King. Deutsche Bank’s Scott Helfman didn’t immediately respond to a request for comment.

Renren traces its roots back to 2005, when graduates of Tsinghua University in Beijing founded Xiaonei.com, or “Inside School.” That was the year after Mark Zuckerberg, chief executive officer of Facebook, created his service for fellow Harvard University students.

In 2006, Xiaonei was acquired by closely held Oak Pacific Interactive Corp., which renamed the service Renren in 2009. Softbank Corp., Japan’s fastest-growing mobile-phone carrier, is the biggest shareholder in Beijing-based Oak Pacific.
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Facebook does have some Chinese users, who circumvent censors through so-called virtual private networks, according to data compiled by Socialbakers.com, a site dedicated to analyzing Facebook statistics.

Facebook, the world’s biggest social-networking site, will start reporting financial results by April 2012, even if it doesn’t go public, according to a document sent to prospective investors. The company would be forced to make disclosures because it expects to have at least 500 shareholders by the end of this year, a threshold that makes reporting results necessary under U.S. Securities and Exchange Commission rules, a person who reviewed the document said last month.

--With assistance by Mark Lee in Hong Kong. Editors: Nick Turner, Nathaniel Espino.