IPO: The Hottest IPO Of 2011?

| April 25, 2011 | 0 Comments

Open your calendar and draw a big red circle around next Wednesday, May 4th.  That's the day we just might see the hottest IPO of the year.

If you're thinking Facebook, you'd be wrong.  But you wouldn't be too far off.  It will be the world's first IPO of the wildly popular social networking websites.

I'm talking about Chinese social networking website, Renren.com.

Renren, which means “Everyone Network”, is considered by many as China's version of Facebook.  Thanks to the lack of anti-piracy laws in China, Renren is able to copy Facebook in nearly every detail… even down to the universally recognized blue and white color scheme.

According to iResearch, Renren is the leading ‘real-name' social networking site in China.

They have over 117 million activated users sharing information and content, playing online games, listening to music, and shopping for deals. And the site dominates China's real name social networking niche on total page views, total number of visits, and total user time.

This is very important.  Remember, sites garnering the most eyeballs are best positioned to generate steady, fast-growing revenue and profit streams.

There are several other social networking sites in China to be sure.  But most of them allow members to use aliases or virtual identities.  With most users now preferring real name sites, Renren is in pole position to dominate China's social networking space.

How does the company make money?

Renren makes money from online games and online advertising.  Last year, revenues surged 64% to a cool $32 million.  And after posting an operating loss of $2.2 million in 2009, the company posted operating income of $7.7 million in 2010.

Renren's IPO is sure to be a wild and crazy ride…

Investors have been salivating over the rumored Facebook IPO for months.  Everyone wants a piece of the world's biggest social networking site.  At last count, Facebook had over 600 million activated users worldwide.

And many experts estimate Facebook is worth an eye-popping $70 billion.

While Renren is smaller than Facebook right now, it has the advantage by being the first social networking site on the planet to go public.

By launching next week, they're getting the drop on every other Chinese social networking site.  And more importantly, they're beating Facebook, Twitter, and LinkedIn to the punch.

In other words, Renren will be investors' first opportunity to grab a piece of the exploding social networking industry.  And as the first social networking site to go public, Renren is almost certainly going to see heavy investor interest.

And that's not all…

Renren also has another ace up their sleeve.

They won't have to compete with Facebook in China.  You see, Facebook is banned by the Chinese government from operating in the country.  A status that isn't likely to change anytime soon.

The Chinese have watched how Facebook has played a big part in the uprisings sweeping the Middle East.  And they definitely don't want Facebook stirring up unrest in China.

While I don't usually buy shares on the IPO, this one might be the rare exception.  Renren could be one of the few IPOs that soars on the first day of trading and never looks back.  Given the rabid enthusiasm for social networking sites, Renren just might be worth a gamble on opening day

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Category: Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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