Back in May, Renren (Nasdaq:RENN) pulled off a successful IPO, with the stock moving up 28% on its first day of trading. With the company being touted as the �Facebook of China.� How could it lose?
It�s done just that — since Renren�s debut, shares have plunged below $5 from $24.
Yet there are still some bright spots. For example, last week Renren announced a strong third quarter last week with revenue jumping 57.1% and the number of activated users increasing to 137 million from 103 million. In addition, as an indication of the site�s engagement, total monthly unique logins went to 38 million from 24 million over the past year.
However, the company lost $1.2 million, as Renren�s costs have exploded. Over the past year, operating expenses surged 145.9%, and selling & marketing costs were up 274.1%. A big part of all this came from the company�s investment in e-commerce firm Nuomi.
At the same time, Renren is facing intense competition, with rivals including Tencent, Sina (Nasdaq:SINA) and Youku.com (Nasdaq:YOKU). Renren CEO Joseph Chen mentioned the harsh competitive environment in the recent earnings release.
To counter its rivals, the company has been moving aggressively into high-growth areas, which include mobile and video. Renren recently purchased 56.com, a Chinese user-generated video sharing site.
While the company is making some important moves, it will still take time to get traction � if that is still possible. Even with the shares much cheaper now, this is probably a stock to still avoid.
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