The Chinese social networking site is buying video-sharing site 56.com. The hub of user-generated content isn't as popular as the recently public Youku.com
This is a brilliant move on Renren's part. The real-name network has 124.2 million users. Even if only a quarter of those registrations are active on the site, that's a lot of people that it can funnel toward 56.com for their video-sharing needs. In other words, it's a great way for Renren to increase the traffic to a site that it's buying.
You don't often see "brilliant" and "Renren" in the same sentence, but that's because the stock went public at a ridiculous valuation. Going public at $14 with a whopping 400 million ADS outstanding four months ago tagged the stock with an unjustifiable $5.6 billion market cap.
Renren's good and growing, but not that good.
Revenue climbed 53% to just $30.4 million in its latest quarter, and adjusted earnings fell to a mere $2.3 million.
Valuation concerns and the same ownership structure concerns that have dogged dot-com darlings SINA
Has Renren finally bottomed out? I have been rightfully bearish on the way down, but this morning I went ahead and gave this falling steak knife a thumbs-up rating on the Motley Fool CAPS rating platform. I'm not entirely comfortable with the $2 billion market cap, but this isn't the kind of story stock -- China's Facebook -- that investors may ever get at a discount.
The 56.com purchase is brilliant in every way, and hopefully it will be just the beginning of Renren's publicly traded turnaround.
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