Renren (NYSE:RENN) gained 18.8% in September, according to data from S&P Global Market Intelligence. The price movement likely stemmed from ratings upgrades and the departure of an embattled CEO from one of Renren's key investment holdings.
As a small-cap company with a valuation of roughly $600 million, Renren is prone to big swings in relation to news stories. Last month, price-shifting news arrived in the form of ratings upgrades and personnel changes outside the company. On the ratings side of things, ValuEngine upgraded Renren stock from a sell to a hold on Sept. 1, and the BidaskClub published a note that mirrored ValuEngine's ratings adjustment later in the month.
The stock also appears to have benefited from the news that the CEO of Social Finance (a company Renren owns a substantial stake in and one of its most important holdings) had stepped down following allegations of sexual harassment.
Renren's business has deteriorated substantially since its 2011 initial public offering, and it doesn't appear to be in position to make a comeback. The company's core social media platform has lost more than 70% of its monthly active users since 2011, and the mindshare and resource advantages enjoyed by leading rival platforms make it unlikely that Renren will see a resurgence. With the company still shedding users, its push to become an internet-based auto sales and financing business seems to be its most promising initiative -- and the linchpin of returning to profitability.
While the outlook for Renren's business is less than promising, the company's investment portfolio seems to be attracting attention. In fact, its investment holdings are bigger than its market cap, and CEO Joe Chen is in the process of implementing a plan that would allow qualified shareholders to exchange their stock for a position in an offshoot security built around Renren's investment portfolio.
This move may give Renren added appeal for some investors, but those hunting for a sound underlying business to hold for the long term should probably look elsewhere.