innerscorecard Posted August 4, 2015 Share Posted August 4, 2015 RenRen is another sum-of-the-parts story wrapped in a crappy business, with China wrinkles. It's like Yahoo, but in reverse - it's a crappy Chinese internet company (much crappier than Yahoo, in fact) with most of its value coming from outside its non-operating businesses. Oh, and management made a non-binding offer to take the company private at $4.20. Which is decently above the current market price. ($3.54 at the time of this writing.) For a rough sum-of-the-parts valuation, I'll just quote from a letter to the board from some investors sent on July 24, 2015 (not a great one at all): Please consider an analysis of the most significant assets in the 20-F filing dated April 16, 2015. 24% stake in Social Finance, Inc ("SoFi"), a leader in P2P online marketplace lending who offers a highly differentiated and coveted platform with an emphasis on student loans. SoFi, is the #2 online lender based on originations just behind #1 Lending Club who has a market cap of $5.5 B. SoFi has publicly stated their intent to go public in the next year and it would be logical to assume it would have a market cap similar to Lending Club when it commences trading. Cash, cash equivalents and short term investments of $400MM+ Long term and VC investments (exclusive of SoFi's cost) of at least $450 MM+. Renren has made 25+ investments where over half are FinTech related and half are in the domestic US. Renren is making a global play on the FinTech revolution, it is far from just a China play and in many ways is diversified away from the recent China market volatility. Renren has 40MM+ active monthly users with an emphasis on the college aged demographic. This is a massive base of organic traffic, and competitive advantage, which should allow Renren an inexpensive way to acquire customers for their internet financial services products. Clearly, the $4.20 per ADS offer by Chen and Liu ($1.428 Billion valuation on roughly 340MM ADS outstanding) is offensive and ludicrous. In fact, when utilizing information available in the public domain, one could reasonably and realistically value Renren's SoFi stake alone, exclusive of the other aforementioned assets, at $1 B when it hits the public markets. In my mind, the considerable gap between the current price and $4.20 is as wide as it is because of muddled uncertainty without a clear reason caused by the recent China volatility. Link to comment Share on other sites More sharing options...
ccplz Posted June 29, 2017 Share Posted June 29, 2017 Anyone been following the spinoff story? Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted July 4, 2017 Share Posted July 4, 2017 Anyone been following the spinoff story? I am. What's happening here has been absolutely disgusting, Chinese management and Softbank are trying to take the valuable assets of the company private while shafting institutional and retail shareholders with a cash offer way below the true value of the assets. Unaccredited individual investors and funds that aren't mandated to hold private investments are now dumping their shares en masse, meaning that the value of this company is now at ridiculous levels. For example, Renren's current market cap is $400M, their stake in Social Finance (SoFi) alone is worth $800M based on the fundraising that they did just four months ago. That is just one investment they own, the balance sheet contains lots of other valuable assets that are record at a fraction of true value. Management however have no interest in trying to give shareholders a true picture of the situation, provide no guidance or financials on the investments they own, indeed the company have not hosted a conference call since 2015 and have been utterly silent on communicating with shareholders. I think there is value here, but majority shareholders really are trying to do everything they can to grab what they can. A recent example in the last quarterly says the company have decided they are going to swap Woxiu for Beijing Zhenzhong in the assets they are looking to spin if the private company As of the date of this earnings release, the special committee is considering a revised plan to dispose of Beijing Zhenzhong Interactive Information Technology Co., Ltd. (“Zhenzhong”), rather than the Woxiu business as previously announced, together with most of the Company’s investments in minority stakes in its investee companies. Zhenzhong is the wholly owned subsidiary of one of the Company’s consolidated affiliated entities and operates an advertising agency business. There is no disclosure towards the value Zhenzhong, the reports of the company make no mention of revenue or profit that the subsidiary makes. The only conclusion an investor can draw is likely that the asset is valuable, hence why management are eager to take it into the private spinco. I am actually surprised we haven't seen a lawsuit here. Link to comment Share on other sites More sharing options...
ccplz Posted July 5, 2017 Share Posted July 5, 2017 How much cash are they offering for the assets? Has the amount been confirmed? Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted July 5, 2017 Share Posted July 5, 2017 How much cash are they offering for the assets? Has the amount been confirmed? We don't know. https://www.sec.gov/Archives/edgar/data/1509223/000114420416126157/v449769_ex99-1.htm Link to comment Share on other sites More sharing options...
hillfronter83 Posted May 7, 2018 Share Posted May 7, 2018 So RENN is finally set to "spinoff" its investment asset a Cayman Island company in a private placement. Only eligible investors are allowed to participate in the private placement. The rest of the shareholders will be receiving a dividend between $7.2-9.1/ADS. The CEO screwed shareholders pretty hard by self dealing himself some very valuable assets on the book for more than $500m for $500m. But at this price, I think this could be some interesting special situation play. Assuming stub trading at $0.5/share, current price seems indicate participate ratio of around 40%, which seems to be very high. Any thoughts? Link to comment Share on other sites More sharing options...
writser Posted May 7, 2018 Share Posted May 7, 2018 Thanks for the update. Looks interesting. According to the filing pro forma book value is $200m - $349m (based on Q3 '17 numbers, so should be slightly less now) depending on how many people subscribe for OPI shares. If the dividend is tax-free (I think it should be - a Cayman PFIC trading in the US, but I'm from Europe, not sure) you're looking at $7.25 + a ~$4.75 BV stub or $9.14 + a $2.50 BV stub. Stub will probably trade at a huge discount given that a) crooks are in control and b) crooks stole all the good assets but still, if the deal goes through you'll probably do fine at current prices. Hard to judge how many investors will waive the dividend but I assume quite a few funds / etf's / retail investors don't or can't participate. Also, the whole deal is so disgusting that that could be a possible cause for a mispricing. I might have to hold back my puke and buy a few shares. Not much, given how insiders obviously don't give a shit about minority holders. Link to comment Share on other sites More sharing options...
_JJ_ Posted May 8, 2018 Share Posted May 8, 2018 Took a speculative position: bought some $9 May18 calls. Looking for some fireworks approaching the ex/record date 8) Link to comment Share on other sites More sharing options...
Hielko Posted May 8, 2018 Share Posted May 8, 2018 Why $9 calls? Seems sort of pointless to me? You probably have to exercise them early if you want to receive the dividend? Link to comment Share on other sites More sharing options...
rukawa Posted May 11, 2018 Share Posted May 11, 2018 I don't get it. Why would the dividend be tax free? At least in Canada I can't see why. It would get taxed at your marginal which in Canada is like 46%. It only makes sense in a tax-free account. Stub will probably trade at a huge discount given that a) crooks are in control and b) crooks stole all the good assets but still, if the deal goes through you'll probably do fine at current prices. Hard to judge how many investors will waive the dividend but I assume quite a few funds / etf's / retail investors don't or can't participate. Usually when I see deals like this the stub ends up trading at close to its pre-deal value or even less and only appreciates after the deal. Given that I don't see why one would buy the shares....why not just buy the stub post-deal? Also my values are slightly different than yours: minimum participation I get 7.25 + 341m/(1.028b shares/15 share/ads) = 7.25 + 4.98 = 12.23 max participation: 9.14 + 210/(1.028b/15)) = 9.14 + 3.07 = 12.21 So basically right now you are purchasing $12.23 for $8.74 Link to comment Share on other sites More sharing options...
cameronfen Posted May 11, 2018 Share Posted May 11, 2018 I don't get it. Why would the dividend be tax free? At least in Canada I can't see why. It would get taxed at your marginal which in Canada is like 46%. It only makes sense in a tax-free account. I dont know exactly if it is considered a return of capital, but even if it wasn't youd get the equivalent amount as loss of value of the stock. Link to comment Share on other sites More sharing options...
rukawa Posted May 12, 2018 Share Posted May 12, 2018 Not exactly. Dividends are taxed at marginal since they are considered income. Cap gains losses are at half marginal since they are capital gains/losses. At least in Canada that is true. I think US is the same unless its a qualified dividend. But qualified dividends require ownership of the stock 60 days before the ex-dividend date. https://en.wikipedia.org/wiki/Qualified_dividend Does anyone know about the tax treatment of this in either US or Canada? Link to comment Share on other sites More sharing options...
rb Posted May 12, 2018 Share Posted May 12, 2018 You've got it. In Canada that dividend is straight up income. Link to comment Share on other sites More sharing options...
writser Posted May 14, 2018 Share Posted May 14, 2018 FT: Renren asset sale stirs anger of small shareholders. Link to comment Share on other sites More sharing options...
ccplz Posted May 14, 2018 Share Posted May 14, 2018 FT: Renren asset sale stirs anger of small shareholders. How would you value a business like SoFI? Link to comment Share on other sites More sharing options...
hillfronter83 Posted May 14, 2018 Share Posted May 14, 2018 FT: Renren asset sale stirs anger of small shareholders. They also adjusted procedure of transaction. Now due bill settlement process will be in effect, which should have been the case in first place IMO. Company is feeling heat from media report and minority shareholder. The risk is probably for the transaction to drag on. Link to comment Share on other sites More sharing options...
writser Posted May 14, 2018 Share Posted May 14, 2018 FT: Renren asset sale stirs anger of small shareholders. How would you value a business like SoFI? To be fair I have no clue. Renren insiders are buying it at ~50% of the last private placement - that sounds like a good deal. And yeah, they changed the record date. This might lead to less interesting trading opportunities but it's a far more logical solution. Kind of strange they didn't do it like this in the first place. Link to comment Share on other sites More sharing options...
writser Posted June 14, 2018 Share Posted June 14, 2018 RENN has crept up over the past few days and looks somewhat more logically priced as of today. There's $12 of 'value' but the stub is probably going to (and should) trade at a large discount. Package value around $10 / $11, ignoring taxes? Link to comment Share on other sites More sharing options...
writser Posted June 15, 2018 Share Posted June 15, 2018 https://www.sec.gov/Archives/edgar/data/1509223/000114420418034319/tv496562_ex99-1.htm Renren will pay a cash dividend of US$0.6125 per ordinary share of Renren, or US$9.1875 per ADS, to all shareholders of Renren as of 5:00 p.m. Eastern time on June 14, 2018, other than those shareholders who have waived the cash dividend in connection with the private placement. The aggregate amount of the cash dividend payable by Renren to all the eligible shareholders will be approximately US$134.3 million. The cash dividend will be paid as soon as practicable after the closing of the private placement. Link to comment Share on other sites More sharing options...
hillfronter83 Posted June 15, 2018 Share Posted June 15, 2018 https://www.sec.gov/Archives/edgar/data/1509223/000114420418034319/tv496562_ex99-1.htm Renren will pay a cash dividend of US$0.6125 per ordinary share of Renren, or US$9.1875 per ADS, to all shareholders of Renren as of 5:00 p.m. Eastern time on June 14, 2018, other than those shareholders who have waived the cash dividend in connection with the private placement. The aggregate amount of the cash dividend payable by Renren to all the eligible shareholders will be approximately US$134.3 million. The cash dividend will be paid as soon as practicable after the closing of the private placement. The thesis has largely played out. Right now market values stub around $0.8/share for roughly $3/share book value with decent business. I can see this may trade all over the place with a crook at rein. Link to comment Share on other sites More sharing options...
writser Posted June 15, 2018 Share Posted June 15, 2018 Well, a ~70% discount to NAV seems a bit on the high side - I'd say it is still on the cheap side even given the hair. Also, who is the marginal buyer right now? I can see a lot of reasons for people to sell today. So I think there's still some upside left but I agree with you that the 'easy' money (at least in hindsight :) ) has been made. Link to comment Share on other sites More sharing options...
writser Posted June 19, 2018 Share Posted June 19, 2018 I've been flipping this around a little bit. Today you could buy the stub for $0.25 for a short while. Pro forma book value 174m as per todays update or ~$2.50 per share. Tangible book ~$0.90 per share. Not sure where it should trade but that seems too cheap. Link to comment Share on other sites More sharing options...
hillfronter83 Posted June 19, 2018 Share Posted June 19, 2018 I've been flipping this around a little bit. Today you could buy the stub for $0.25 for a short while. Pro forma book value 174m as per todays update or ~$2.50 per share. Tangible book ~$0.90 per share. Not sure where it should trade but that seems too cheap. I grabbed a few more shares around $9.6 adding to an already big position. Its used car business seems doing fine. Link to comment Share on other sites More sharing options...
writser Posted June 22, 2018 Share Posted June 22, 2018 Premarket stub now at $1.90 .. Large volume, no borrow. Link to comment Share on other sites More sharing options...
hillfronter83 Posted June 22, 2018 Share Posted June 22, 2018 Premarket stub now at $1.90 .. Large volume, no borrow. Do you want to short? As a fast growing business, it can easily trade at many multiples of book value if not for the management. Link to comment Share on other sites More sharing options...
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