Renren, which has more than 160 million registered users, is working with Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG to prepare for the IPO, said Bloomberg.com citing unnamed sources.
The company, which means “everyone,” is one of about 60 Chinese firms expected to offer IPOs in 2011. The number represents a 50 percent increase over last year when 41 Chinese companies listed stocks in the U.S., reported the People’s Daily Online.
Appreciation of China’s currency, a number of successful IPOs in 2010 and China’s projected economic growth are driving the increase in IPOs, the People’s Daily said.
Most of the IPOs this year will be by small- and medium-sized internet or high-tech companies that have great growth potential, but have not yet posted a profit, the online English version of the People’s Daily said. Companies that are not profitable have a difficult time listing in China, but U.S. exchanges let the investors decide whether a company is worth the risk.
The year closed with several notable IPOs by Chinese firms, including offerings by Youku.com Inc., an online video provider, and E-Commerce China Dangdang Inc., the country’s largest online book retailer. Chinese companies have accounted for some the biggest IPO offerings of 2010, showing that the market is hungry for emerging stocks, Bloomberg said.
Forbes.com columnist Gady Epstein calls for “alertness and patience” when considering an IPO: “You never know when a heralded IPO will start taking a tumble due to jittery investors.”
Epstein notes that it may take years to see how these companies will fare in the competitive high-tech market. He advises, “So if you’re going to make a bet, be prepared to wait for the results. And in the meantime, be prepared for a roller coaster of investor sentiment that may be tied less to the fundamentals of these businesses than to the ebb and flow of the `China story’.”
The MotleyFool, which had warned investors away from Chinese IPOs in 2009, predicts the stocks to endure several boom-bust cycles over the next decade.