When is Pinterest’s IPO date?

What are the odds that we’ll see a Pinterest IPO? And if we do when will we see it?

Now that Facebook’s IPO is in the works, investors have started casting around for the next big tech IPO, and Pinterest is one of the names that keeps cropping up. What are the odds that we’ll see a Pinterest IPO? And if we do, when will we see it?

“Big-name social networks like Twitter and Pinterest are months, if not years, from needing to go public, most experts say, given the gobs of money venture capitalists have been throwing at them,” writes Peter Delevett of the Mercury News.

In Pinterest’s case, the company has already raised $30 million in venture capital. Rumors are they’re casting around for more, too, with some sites claiming VCs are valuing Pinterest north of $1 billion. That’s the sort of valuation where an IPO starts looking imminent. And it could help Pinterest raise the warchest it’ll need to bring in the right execs, law firms and bankers to transition from a start-up to a public company.

It’s in Pinterest’s best interests to go public sooner rather than later – especially as competitors like PinView (an app that lets Facebook users use the social network just like they use Pinterest) start nipping at their heels.

So, let’s speculate on when we might see a Pinterest IPO. The first and largest hurdle is the fact that Pinterest isn’t generating revenue. Potential investors would want to see the company roll out a platform for ads, or – at the very least – have future revenue plans in the works.

We can safely assume Pinterest is investigating revenue models. Until they launch one, expect them to “pull a Twitter” and delay going public for as long as possible. Once they’ve started generating income, the next steps on the road to an IPO should come quickly.

After revenue kicks in, they’ll need advisors and (potentially) a seasoned CFO. The company will also need lawyers, auditors and a investment bank. With those pieces in place, Pinterest will file a Form S-1 with the Securities and Exchange Commission. That form will give the public its first look at Pinterest’s finances, and it will need to be approved by the SEC, NASD and state securities organizations – a process that can take anywhere from 20 to 60 days.

After that, we’d likely see a two-week roadshow during which Pinterest will try to drum up investor interest in the company. A few days after the roadshow ends, shares in Pinterest stock would officially start trading.

To use Facebook as an example, the social network filed it’s Form S-1 on Feb. 1, 2012. Per the latest rumbling on the Web, the company will officially go public on May 17, 2012, three-and-a-half months later. Taking that into account, here’s a rough, shot-in-the-dark formula for when we might see a Pinterest IPO:

Development and rollout of a revenue model + Hiring a CFO and lining up finances/investment banks + Filing and approval of an S-1 + Investor roadshow = IPO date

Given that formula, my best guess is we’ll see a Pinterest IPO within a year of the introduction of a revenue model. That would give Pinterest at least three quarters of financial growth to show off in their S-1 filing.

Now, the question becomes, when will we see a revenue model on the site? Considering the fact that they’re growing faster than just about any other Web site in history, I suspect they’re predominantly focused on user and system support right now. Perhaps we’ll see revenue models roll out this fall, then an IPO just over a year later. That puts my tentative guess somewhere around January 2014. I just wish I could get my hands on shares before then…

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What is Facebook’s IPO date?

Our best guess is you can look for your opportunity to buy stock in Facebook around…

Now that Facebook has filed an S-1 with the Securities and Exchange Commission, the company’s actual IPO date is drawing near. It’s unclear when shares in the company will start trading, but we can make a rough guess.

Facebook filed its 200-page Form S-1 on February 1, 2012. The SEC, NASD and state securities organizations must approve the S-1 before Facebook shares can start trading. That process takes anywhere from 20 to 60 days. That means Facebook shares could start trading as early as the end of February. In all likelihood, though, it will probably take longer for Facebook’s S-1 to get approved.

Facebook’s S-1 weighs in at 14MB and 200 pages. It’s also been subject to close public scrutiny. The SEC will want to ensure everything’s correct, and that means they’ll probably take closer to 60 days to approve the filing. If they find any omissions or need clarifications, they could require Facebook to file an amended S-1, which could further delay the IPO process.

Our best guess is you can look for your opportunity to buy stock in Facebook around the end of March or beginning of April 2012.

Photo by Dreamtwist.

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Top five best social media stocks

Even before Facebook and Twitter go to the markets, there are already a handful of pure plays in the social networking space. Here’s a look at the Top 5 social media stocks to date.

It’s becoming clear that social networking is big business – particularly on the heels of news that Global X is planning a social media ETF. Throw in upcoming IPOs from Twitter and Facebook, and it’s starting to feel like 1999. Even before Facebook and Twitter go to the markets, though, there are already a handful of pure (or nearly pure) plays in the social networking space. Here’s a look at the Top 5 social media stocks to date:

top-5-best-social-networking-stocks1) LinkedIn Corporation (NYSE:LNKD). Trading at a P/E of 646, LinkedIn isn’t cheap. The social networking site for professionals does have some interesting tricks up its sleeve, though. For one, more than a quarter of the company’s revenue comes from subscription-based services. That gives it a steady flow of incoming cash that a lot of the company’s peers don’t have. Check out my post “LinkedIn IPO: 5 things you don’t know about the professional social network” for more.

2) RenRen Inc. (NYSE:RENN). RenRen lost $64 million last year, but the company’s growth prospects as the “Facebook of China” are tantalizing. Traffic at the site is up more than 12 percent over the past three months, according to Internet stats company Alexa.com (that’s roughly the amount of time since RenRen’s IPO). Alexa ranks RenRen.com as the 16th most-visited site in China.

3) SINA Corporation (NASDAQ:SINA). OK. SINA’s not a pure social media stock play, but the company does own Weibo.com. Weibo (pronounced “WAY-bwah”) happens to be the Chinese equivalent of Twitter on steroids. Growth at the micro-blogging site is off the charts. Over the past three months, it’s shot up 865 percent. That’s got SINA (which is partially owned by Yahoo!) thinking about spinning Weibo off.

4) Taomee Holdings Ltd. (NYSE:TAOM). Don’t feel bad if you haven’t heard of Taomee. You probably wouldn’t have unless you’re a child with an Internet connection in China. Taomee operates safe social networking spaces for tykes. The virtual worlds the company has created are quickly morphing into the offline world, too, with bestselling books and upcoming TV and movie projects in the pipeline (Click to read our recent article: Five reasons to invest in Taomee IPO (TAOM) for more).

5) Tencent Holdings Ltd. (HKG:0700). I’ve listed Tencent in the No. 5 slot simply because you can’t buy shares in the Chinese tech giant on American exchanges (you’ll have to trade shares on the Hong Kong Stock Exchange). Tencent operates China’s second most-popular Web site: QQ.com. QQ’s instant messaging software is omnipresent in China. In fact, with more than 647 million users, it’s the largest online community in the world.

Honorable Mentions: Ancestry.com (NASDAQ:ACOM) and Jiayuan.com International Ltd. (NASDAQ:DATE). Read more on Jiayuan: 3 reasons to invest in Chinese dating site Jiayuan.com.

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5 reasons LinkedIn’s stock is set to plunge (LNKD)

Here are five reasons LinkedIn stock forecasts might be overly optimistic, and a fall from grace for the professional social networking company could be overdue.

Since its IPO on May 20, 2001, shares in LinkedIn Corporation (NYSE:LNKD) have tumbled 35 percent from a first-day high around $120 to $78 a share. That’s still 73 percent higher than the IPO price set by Morgan Stanley, Bank of America and JPMorgan Chase. And yet, not everyone’s convinced LinkedIn’s future looks like a fairy tale. Here are five reasons LinkedIn stock forecasts might be overly optimistic and a fall from grace could be overdue:

1) Small numbers. For the nine months ended Sept. 30, LinkedIn netted $2 million on revenue of $161 million, and the company is forecasting a loss for 2011 as it looks to aggressively expand its user base. Not only are the profit margins fairly small at LinkedIn, they’re going to be shrink as the company gambles on growth at the expense of profits. Ongoing losses could force out speculative investors with short investing timelines. Even the company’s initial IPO valuation at $4 billion “assumes an $100 million-plus in 2012 net, along with a Google-like growth trajectory for the next 5-10 years,” writes Promod Radhakrishnan at SeekingAlpha. Those are heady numbers for any company – even one with the clout of LinkedIn.

2) Narrow context. Investors and analysts seem overly eager to dub LinkedIn the next Facebook. The fact is the site serves a niche (white-collar employees and recruiters) that faces practical limits. All told, there are roughly 150 million people in the U.S. workforce. Of that number, approximately 60 percent (or 90 million) hold the professional, managerial and/or sales jobs that dominate LinkedIn’s user base. At the moment, LinkedIn claims more than 100 million users, and the U.S. market could be reaching maturity. Growth will likely be powered outside of the country where native start-ups are directly targeting LinkedIn. Facebook, which doesn’t serve a limited niche, will – by default – appeal to a broader user base (and likely grow faster as well).

3) “This is a sideshow.” To say LinkedIn’s meteoric valuation has professional investors scratching their heads is a bit of an understatement. Lawrence Haverty who helps oversee $35 billion at Gamco Investors, Inc., put it bluntly in an interview with BusinessWeek: “This is not something we even consider investing in. This is a sideshow. It’s a magic show. The only question for the investor is how soon they should sell.” Per Haverty’s EBITDA analysis, shares should be trading closer to $35 a share – not $80.

4) Insider selling. Six months from now, more than 85 million LinkedIn shares held by company insiders will start to be eligible for trading. That means the public’s been swapping back and forth a mere 7.8 million of the 95 million shares outstanding. Once supply and demand begins equalizing (and LinkedIn employees look to cash in on their paper wealth), prices could fall quickly.

5) Shorters aren’t in short supply. LinkedIn bears have borrowed 65 percent of the shares available for shorting, according to Bloomberg. That makes it the sixth-most shorted stock in the S&P by percentage. Indeed, the average S&P stock has a mere 8.2 percent of short-eligible shares actually sold short. There are a lot of folks betting on LinkedIn making lots of cash, but rest assured their are just as many convinced the stock’s setting up for a dramatic collapse. My guess is, the pros are short, and they’re probably going to make a fair amount of cash in the months to come.

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LinkedIn IPO date and stock price set: Is it a buy?

No one’s quite sure how investors will react to the debut of an U.S.-based social networking site, and that might be what scares me the most.

LinkedIn is set to IPO on the NYSE on Thursday, May 19, 2011, under ticker symbol “LNKD.” It will be the second social networking site to start trading on the Big Board this month after the so-called “Facebook of China,” RenRen.com (NYSE:RENN), went public on May 5.

It appears LinkedIn has piqued investor interest. The company raised its offer price $10 yesterday from a range of $32-$35 per share to $42-$45 per share. LinkedIn, which targets white-collar professionals, has displayed some impressive growth. Revenue doubled last year to $243 million and membership ballooned around the world to more than 90 million.

Nonetheless, some investors are worried we’re in the midst of Tech Bubble 2.0, and I’m inclined to agree. Here are three reasons to consider holding out before you buy shares in LinkedIn:

1) LinkedIn’s peers. There aren’t many social networking sites that are public, so we don’t have much to go on. In fact, there’s really just one other social networking Web site that trades on U.S. stock exchanges, and that’s China’s RenRen.com. RenRen IPO’d on May 5, and shot up 29 percent in its first day of trading. Not even two weeks later, investors have pushed the stock down 30 percent to $12.73 – a figure that’s below RenRen’s IPO price. If we’re looking for track records in the social networking space, here’s one that says “stay the hell away” (in the short-term, anyway).

2) Steep valuation. Consider this: LinkedIn’s latest valuation puts it at 17 times last year’s revenue. That’s a rather staggering figure when we compare it against other more established tech titans:

  • AOL, Inc. (NYSE:AOL): 1x 2010 revenue
  • Apple Inc. (NASDAQ:AAPL): 12.5x 2010 revenue
  • Google, Inc. (NASDAQ:GOOG): 6x 2010 revenue
  • Microsoft Corporation (NASDAQ:MSFT): 3.5x 2010 revenue
  • Netflix, Inc. (NASDAQ:NFLX): 6x 2010 revenue
  • Yahoo! Inc. (NASDAQ:YHOO): 17x 2010 revenue

Yahoo’s rich valuation is thanks in no small part to it’s rather cunning investments in Chinese tech companies (see my post Three reasons to buy Yahoo! Inc. (YHOO) in 2011).

3) Bad timing? Earlier this week I penned a piece titled Stock market crash looming on horizon? The gist? Darkening clouds seem to be gathering on the horizon for the broader stock market. Commodities have crumbled in recent weeks, defensive stocks including healthcare and blue chips are on the rise and inflation’s starting to cut into the pocketbooks of consumers. Shares in speculative companies like LinkedIn could get hit the hardest in the event of a major downturn in the markets.

Not buying my arguments? Convinced LinkedIn stock is going to start strong and shoot for the moon? Check out my post 3 reasons to buy LinkedIn shares during IPO, which outlines the bullish case for the company. If you’re looking for more reasons to stay away, I can indulge you there as well with my post: 3 reasons NOT to invest in LinkedIn IPO.

The fact of the matter is, we’re in uncharted waters. No one’s quite sure how investors will react to the debut of an U.S.-based social networking site. That might be what scares me the most. Investing isn’t about having a “hunch” a stock will do well; it’s about picking companies with strong profits and even better prospects for the future. LinkedIn’s got great prospects, but it’s clear we won’t be seeing profits anytime soon. That makes buying shares a gamble – particularly on LinkedIn’s first day of trading.

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3 reasons NOT to invest in LinkedIn IPO

The vast majority of LinkedIn’s members rarely ever visit the site – a fact that has some investors turning their noses at the company’s upcoming IPO.

The social networking site for professionals and job seekers, LinkedIn.com, has valued itself at $3 billion in the run-up to its IPO. That’s about 12 times 2010 revenue (per Reuters), and that makes it a bargain compared to some of the Chinese tech IPOs we’ve seen of late. RenRen, for instance, is trading at 76 times revenue. The relatively low valuation for LinkedIn has some investors second guessing big bets on the company’s prospects for growth. Here are three reasons why it might be a good idea to park your cash somewhere other than in the LinkedIn IPO:

1) Niche audience. LinkedIn caters to a very specific subset of the population: job seekers and professionals eager to network. While that makes the site a great marketing tool for recruiters and companies eager to fill white collar jobs, it also automatically puts a cap on the site’s potential audience. Since companies like Twitter, Facebook and RenRen don’t target specific niches, their long-term growth prospects aren’t nearly as limited.

2) Not profitable yet. Don’t look for LinkedIn to start posting profits this year. The company’s said as much in its IPO filing: “We expect revenue growth rate to decline, and as we continue to invest for future growth, we do not expect to be profitable on a GAAP basis in 2011.” LinkedIn plans to ramp up hiring and re-invest in rolling out new features on the site instead. If those features are successful in substantially boosting traffic and membership on the site, profits could be just around the corner … That is, however, a big “if” (just as it is for Facebook, Twitter and RenRen). Albert Babayev as SeekingAlpha believes the company’s revenue multiple will fall below where it is today (to 7x or maybe even 5x) in the coming years. That means it’ll be worth less than what it’s trading for even now on private exchanges.

3) Plateauing growth. Pageviews at LinkedIn appear to have flat-lined since the start of the year:

Source: Alexa.com

Babayev actually points out an even more damning fact: the vast majority of LinkedIn’s members rarely ever visit the site. “LinkedIn has 1% of total Facebook visits, while boasting to have an equivalent of 16% of Facebook users,” he writes based on stats from Compete.com. It’s clear then that LinkedIn is far less sticky (about 15 percent less) than Facebook. Squeezing more dollars our of the same audience is a daunting task.

Despite these arguments against investing in a LinkedIn IPO, I’m still fairly bullish on the company. It’s model isn’t nearly as reliant on advertising as that of rivals like Facebook and Twitter. Last year, LinkedIn generated the bulk of its revenue (41 percent) by selling job listings on the site. The rest came from a mix advertising (32 percent) and premium subscriptions (27 percent). Multiple revenue streams ensure the company will have cashflow to fund new features and grow it’s membership base. In the end, though, investors will have the last say, and I imagine they’ll welcome the stock with open arms. A year or two down the road, LinkedIn’s future looks a lot more murky.

LinkedIn IPO Date: A specific date has not yet been set, but it will likely be within two weeks.

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RenRen IPO: 5 things you don’t know about ‘China’s Facebook’

While the mainstream media has flooded the tubes with news stories on RenRen, here are five things you might not have known about the “Facebook of China.”

RenRen’s IPO date has arrived. Shares in the “Facebook of China” will begin trading today (May 4, 2011) on the NYSE under ticker symbol “RENN.” The whole affair has the feel of being backstage before a Justin Bieber concert, which is to say traders are giddy.

Finally, we’ll get to sink our hands into a genuine social networking stock. Better yet, it hails from behind the Great Firewall in the world’s largest Internet market. Expect fireworks.

While the mainstream media has flooded the tubes with news stories on RenRen, here are five things you might not have known about the “Facebook of China”:

1) Pony up for those brand pages. RenRen may have copied the master (Facebook) in the beginning, but it’s taken a slightly different tact toward advertising. Rather than giving away “fan pages” to businesses for free, RenRen charges companies upwards of $90,000 to launch branded “mini-sites” on RenRen. That’s one way to solve the revenue problem that’s hanging over Facebook’s head.

2) It’s messy behind the scenes. News broke yesterday that one of RenRen’s audit-committee chairmen was stepping down after alleged financial fraud at a different Chinese tech company where he serves as CFO. Perhaps that’s not a big deal (since it stems from allegations at a different company), but this might give you pause: RenRen’s had trouble spitting out just how many users the site has. First, they claimed user growth of 29 percent during Q1. A week and a half later, the social networking site backpedaled, saying growth was actually more like 19 percent. Hmmm… As it stands right now, RenRen claimed to have 117 million activated users as of March 31, 2011. Take it for what it’s worth.

3) Strength in numbers. The PRC is home to the world’s largest Internet market with more than 420 million Web users, according to Internet World Stats. That’s nearly twice the number of surfers in the U.S., and China’s Internet penetration rate is just 31 percent! Compare that to the U.S., where 77 percent of the population has Web access. Clearly, the Internet growth story moving forward is going to be told on the other side of the Pacific.

4) Coupons anyone? RenRen operates a Groupon-style deal of the day clone at Nuomi.com. Launched last summer, Nuomi’s already a Top 200 site in China (per Alexa), but it does face stiff competition. The Xinhua News claims there are already more than 2,600 group buying websites in the PRC. Fortunately, RenRen’s IPO warchest might help the company market Nuomi. Execs appear more than willing to do just that as they announced plans to spend more than $30 million in advertising the site in February. They won’t lose the Groupon war without a fight.

5) Multiple social networks in one. Early in April, RenRen launched a second social networking site dubbed “Jingwei.” Jingwei targets professionals who are interested in networking opportunities. If it catches on, we might not have the opportunity to invest just in the “Facebook of China” but the “LinkedIn of China” and the “Groupon of China,” too – all in one stock. What more could you ask for in a country where only the privileged few have access to shares in Facebook, Twitter, Groupon and LinkedIn?

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5 reasons NOT to invest in the RenRen IPO

“The Facebook of China” is probably too tempting of a stock to pass up, but there are still warning signs that warrant acknowledgment before you invest in RenRen’s IPO.

Let me preface this by saying I’ve drank the RenRen Kool-Aid. How could any self-respecting geek turn down the opportunity to invest in the first major U.S. IPO for a social networking stock – especially one that’s being dubbed “the Facebook of China”? Still, there are warning signs that warrant being pointed out (even if you ultimately decide to ignore them in what will probably be a feeding frenzy on IPO day):

1) Competition. As it stands now, Facebook.com is blocked by the Chinese government. Rumors are running rampant that a partnership with Baidu.com, Inc. (NASDAQ:BIDU) – China’s largest search engine – is imminent, though. That could be bad news for RenRen. Who needs a Facebook clone, after all, when you can get the real thing? That said, I’m still not sure Facebook’s willing to turn information on its users over to the Chinese government – particularly if those users end up “disappearing” a few days later. Even if Facebook does decide to move ahead, it won’t happen overnight.

2) How many users do we have? One of the more puzzling pieces of the RenRen IPO is trying to figure out how many people use the site. RenRen itself can’t seem to spit out an accurate number. On April 15, the company claimed monthly uniques grew 29 percent (up 7 million users) during Q1 2011, per the Daily Times. Then, on April 27, RenRen back-tracked saying that monthly uniques were actually up just 19 percent (or 5 million users) during Q1. Weird…

All told, RenRen claims to have 117 million activated users as of March 31, 2011. Sources outside the company including Beijing’s Analysys International had previously reported the site has as many as 160 million registered users. I guess estimates will have to suffice.

3) Accounting abnormalities. “Prior to this offering, we have been a private company with limited accounting personnel and other resources for addressing our internal control over financial reporting,” RenRen writes in its F-1 filing with the SEC. An independent review of the company’s accounting procedures turned up “one material weakness and one significant deficiency.” Namely, the company has “insufficient accounting personnel with appropriate U.S. GAAP knowledge,” no stated plan for investing cash surpluses, and poor management of “treasury functions.” That makes RenRen the sort of company that embezzlers and fraudsters love. And fraudsters aren’t in short supply in China (take, for example, the recent news that the CEO of China’s Puda Coal secretly sold the company and forgot to mention that fact to shareholders).

4) PengYou. Ultimately, RenRen’s biggest competitor might not be Facebook, but rather a homegrown rival in PengYou.com. Two weeks ago, analysts at Goldman Sachs went on the record proclaiming PengYou will “become the dominant social network in China by leveraging (Tencent’s) much larger QQ community and more developed platforms.” Although PengYou launched just five months ago, it’s already the 26th most-visited site in China (check out my post RenRen IPO’s biggest hurdle might be PengYou for more).

5) What are ethics? When RenRen first launched in 2005 as XiaoNei.com, the company labeled itself a “Mark Zuckerberg production.” Zuckerberg, the CEO of Facebook, had nothing to do with the site, of course, but that didn’t really matter to RenRen’s founders. They just made a copy of Facebook and pushed it live. RenRen has something of a reputation for stealing ideas. When Kaixin001.com launched a social networking site in China, RenRen copied it (all the way down to the color scheme) and launched the doppelganger on Kaixin.com. Kaixin001.com eventually won a lawsuit against RenRen, but you can still type in Kaixin.com and get re-directed to RenRen.com. Maybe nice guys do finish last, after all.

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A Sina Weibo IPO could be in the works as China’s Twitter moves to Weibo.com

A Sina Weibo IPO could be in the works as China’s Twitter moves to Weibo.com

China’s popular Twitter-like site Weibo may have taken a step closer to an IPO yesterday by unmooring itself from Sina.com with the launch of Weibo.com.

China’s popular Twitter-like site Weibo may have taken a step closer to an IPO yesterday by unmooring itself from Sina.com. No longer will users have to click or type their way to t.sina.com.cn. Instead, they can type in Weibo.com to access the microblogging site instantly, according to Penn Olson.

Back in February, I wrote a post titled Will we ever see a SINA Weibo IPO? I speculated then that SINA Corporation (NASDAQ:SINA) would be silly to spin off its fastest-growing business. I may have jumped the gun.

All systems seem to be pointing to a Weibo IPO sooner rather than later. First, there was a thinly-sourced report in March from China’s 21st Century Business Herald that claimed Sina was in talks with several investment banks as it mulled a Weibo IPO.

Now, there’s a move to separate the microblogging site from Sina.com by giving it its own domain. Perhaps it’s just a matter of time before we get our hands on an official S-1 filing.

For now, users will be able to use t.sina.com.cn AND weibo.com. Eventually the two sites will be merged, and traffic going to t.sina.com.cn will get re-directed to Weibo.com. The re-branding should help raise public consciousness for Weibo in China and abroad.

“We have successfully built Sina microblog Weibo into the largest and most influential social media platform in China, with user base increasing by more than 25 times in 2010,” Sina’s CEO Charles Chao said after the company’s Q4 earnings report last month.

The total number of Weibo users doubled to 100 million in the four months leading up to the report, and Sina’s in the process of deploying an advertising and a virtual goods marketplace on Weibo. While the microblogging service is yet to generate any revenue, analysts still believe Weibo could be valued at $3 billion or more.

And judging by the success of several recent tech IPOs out of China (including YOKU, DANG and QIHU), a Weibo IPO has the potential to turn into a public spectacle – especially if the site could beat Twitter, LinkedIn and Facebook onto stock exchanges.

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Is Rekoo China’s Zynga?

Zynga’s clout may overshadow Chinese competitor Rekoo, but Rekoo’s approach closely mirrors Zynga’s and the company’s growth is just as potent.

With a valuation around $10 billion, there are few companies that epitomize the growth in social and mobile gaming like Zynga. The maker of FarmVille, Vampire Wars and Scramble Live attracts more than 275 million users to its Facebook games every month – enough to generate an estimated $500 million in revenue every year, according to Dealbook.

Zynga’s clout may overshadow Chinese competitor Rekoo, but Rekoo’s approach closely mirrors Zynga’s and the company’s growth is just as potent. Based in Beijing, the small gaming start-up has looked beyond the Great Firewall as it pushes out titles like Sunshine Ranch, Sunshine Deep Sea and Animal Paradise.

Rekoo first started developing games for Facebook in March 2009. Within six months, Sunshine Ranch and Animal Paradise were so popular that the company was among the Top 10 most successful developers on Facebook, according to Sherman So of Asia Times.

The company’s success outside of China was an eye-opener for Rekoo’s founder Liu Yong. His games were getting just 3 million visitors a day in the U.S., and they were generating revenue of $1 million a month, So writes. Rekoo was getting more than three times as much traffic as that in China, but generating 85 percent less revenue.

Liu saw the writing on the wall, and quickly put the company’s focus on foreign markets. In particular, Liu targeted Japan’s leading social networking site, Mixi.co.jp. The Japanese market was larger than the U.S. market, and customers there were just as willing as Americans to pay for virtual goods. The fact that there was less competition in Japan didn’t hurt either.

Good move. A year and a half later, Rekoo claims 2-3 million visitors to its games in Japan every day. That’s enough for “several million dollars a month” in revenue, So reports. Now, the company’s turning its attention back to the Chinese market with a partnership with China’s largest internet company Tencent.

Liu expects the deal to push Rekoo’s revenue in China from $150,000 a month to $1-$2 million a month by the end of 2011. That would give the company total revenues of more than $50 million a year. Zynga generates ten times as much cash, but a strong foothold in in China could start to close the gap between the two companies. Now, if only Rekoo would consider an IPO.

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