Please ensure Javascript is enabled for purposes of website accessibility

Why Renren Inc. Stock Jumped 13% in September

By Jeremy Bowman – Oct 12, 2016 at 9:32AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Chinese social-media company bounced on plans for a spinoff.

Image source: Renren.

What happened

Shares of Renren Inc. (RENN) were running higher last month, climbing 13% according to data from S&P Global Market Intelligence. The stock jumped toward the end of the month on a plan to spin off some parts of its business:

RENN Chart

RENN data by YCharts.

So what

The Chinese social-media company once known as the "Facebook of China" said that it would "spin off a newly formed subsidiary ... that will hold the company's social video platform and most of the company's investments in minority stakes in privately held companies."

The stock surged 8% on Sept. 30 as Renren announced the move, which is essentially a defensive play -- the company said it wanted to minimize the risk it could be deemed an "investment company" and therefore be subject to different rules.

Now what

The market tends to cheer spinoffs, especially when they're from a troubled stock like Renren: Its shares have fallen nearly 90% since its 2011 IPO.

The stock soared again on Oct. 4, gaining 20% as the company confirmed the spinoff, but it gave back those gains in subsequent sessions. I'd expect continued volatility as the stock remains challenged, with or without the spinoff.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.