RenRen IPO Shows You Don’t Need Revenue Growth To Be Worth $5 Billion

• Posted by bbishop
• on April 30th, 2011

Chinese Facebook clone Renren is on the verge of a blockbuster IPO. The company recently increased the proposed price range of its offering and will likely raise close to $700m at a $5 billion or higher valuation in the next week.

The story is a good one–the Facebook of China (actually, one of several Facebooks of China). The bankers are among the best, Joe Chen is a brilliant CEO with exquisite timing, and investors right now will buy anything that includes the words “China” and “Internet”.

$5B+ is quite a healthy valuation for a money losing company that has barely grown revenue in the last year and in fact has seen sequential revenue decline in the last two quarters. Per the firm’s latest SEC filing, Renren’s Q2 2010 revenue was $19.8m, Q3 2010 was $21.8m, Q4 2010 was $20.9m and Q1 2011 was $20.6m. Is that the revenue trajectory of a supercharged growth story worth billions of dollars?

In this market, yes.

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