3 MORE reasons to invest in the RenRen IPO

RenRen’s IPO easily makes my list of the Top 3 IPOs of 2011. It’s up there with LinkedIn and Yandex. Not sold? Here are three reasons that might change your mind.

I’ve been excited about this for months. Back in February, I wrote a post titled Five reasons to invest in the RenRen.com IPO, and now it looks like we’re getting really close to launch. Here are three more reasons to consider investing in RenRen’s IPO:

1) The writing on the wall. Sometimes, all it takes is investor excitement to push up the value of a stock – even in the absence of underlying fundamentals. Let’s take Youku.com, for example. Shares in the so-called “YouTube of China” IPO’d around $33 in December. Despite revenue of just $23 million and a loss of $5.6 million in the three months ending Dec. 31, shares have risen nearly 100 percent since debuting on NYSE. That puts Youku’s stock at more than 110 times annual revenue! Those are mind-boggling numbers for a company with scanty revenue and a hell of a lot of competition.

It’s hard to deny that Yoku’s trading on much of anything beyond investor exuberance, and I expect the exuberance for the “Facebook of China” to far outpace that of the “YouTube of China” – especially since even a company as large as Google (NASDAQ:GOOG) has had trouble making money with YouTube.

2) Several companies in one. Not only does RenRen operate the most popular “real name” social network in China, it’s also ventured into the professional social networking space with the launch of a LinkedIn-style network dubbed Jingwei (Read more in my post: RenRen readies for IPO by launching second social networking site, cloning LinkedIn). They didn’t stop there, though. The company also operates a Groupon-style deal of the day clone at Nuomi.com. Granted Nuomi’s one of a reported 2,612 group buying websites in China (per the Xinhua News), but RenRen’s parent company is serious about seeing Nuomi succeed. They announced plans in February to pour $30.42 million into advertising the new venture.

3) The fat part of the curve. China’s Internet growth feels a lot like the U.S. tech bubble, except for the fact that there are already lots of Chinese tech companies making real money. The online advertising market in the PRC is expected to triple through 2014 to nearly $13 billion, according to Susquehanna International Group LLP. By contrast, online advertising grew just 15 percent in the U.S. last year, per PCWorld. As advertising rates surge, the biggest beneficiaries will be social networking sites with their warchests full of invaluable data on their users. From ages to location to tastes in music and relationship status, RenRen knows more about their users than Baidu, and – if the company continues to expanding its user base – that could make RenRen even more valuable to advertisers.

Fred’s Best Guess: RenRen easily makes my list of the Top 3 IPOs of 2011. It ranks up there with LinkedIn and Russian search engine Yandex. I expect choppy (dangerous) trading for the first few days, and a steady skyward march after that. I say dollar-cost-average your way into the stock, and hold it for a year to latch onto what could very well be triple-digit gains.

Note: Fred’s Best Guess is just that: a complete guess. It does NOT constitute investment advice and should NEVER be construed as such.

RenRen IPO Vitals

RenRen expected IPO date: May 4, 2011.
RenRen ticker symbol: NYSE:RENN

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