Friday, December 17, 2010

Get Ready for China's Next Blockbuster IPO

By Eric Jackson
RealMoney Contributor
12/16/2010 5:30 PM EST
Click here for more stories by Eric Jackson

If we've learned anything from the successful IPOs of Youku (YOKU - commentary - Trade Now) andDangdang (DANG - commentary - Trade Now) this month, it's that U.S. investors and media love referring to these Chinese companies in relation to their closest domestic equivalents.

Youku was constantly referred to as the "YouTube of China," though some smarter analysts said that it was closer to the "Hulu of China" because of its more professional, rather than user-generated, content. Even more astute analysts made said Youku could possibly become the "Netflix (NFLX - commentary - Trade Now) of China," based on Netflix's new streaming capabilities, which Youku might emulate.

With Dangdang (pronounced "Dong Dong"), the obvious comparison was Amazon (AMZN -commentary - Trade Now), hence it became the "Amazon of China."

Of course, none of these comparisons are completely accurate. One difference is that the newly public Chinese companies face different competitive dynamics in China than their counterparts faced in the U.S. when they were at similar stages of development. There are also differences in the growth rates and potential market sizes. Regardless, investors clearly wanted in on the action.

Other Chinese IPOs last week that weren't instantly compared to U.S. firms, including Bona Film Group(BONA - commentary - Trade Now) (BONA) and Ski-Mobi (MOBI - commentary - Trade Now) quickly saw their stocks fall (though I believe Bona has a great business).

So what's the next big IPO we'll see out of China? Get ready for Renren, the new "Facebook/Groupon of China." Renren, a subsidiary of Beijing-based Oak Pacific Interactive, is China's leading social-networking services (SNS) provider. The company currently has 150 million registered users, 480 million page views a day and 4.1 billion user interactions per day.

To put that into context, Facebook has 500 million active registered users, and its valuation as a private company has recently been estimated to be between $30 billion and $50 billion. Tencent has over 650 million users of its QQ instant messaging service (which is obviously a different type of social service than Facebook), and its market capitalization in Hong Kong is $41 billion (14% bigger than Baidu (BIDU -commentary - Trade Now).)


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