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Renren Leads ADRs Slump as Sales Outlook Miss Estimates

Photographer: Adam Dean/Bloomberg

A staff member walks through the corridors of the head office of Renren Inc. in Beijing, China. Close

A staff member walks through the corridors of the head office of Renren Inc. in Beijing, China.

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Photographer: Adam Dean/Bloomberg

A staff member walks through the corridors of the head office of Renren Inc. in Beijing, China.

Chinese stocks in New York fell for the first time in three days, led by Renren Inc. (RENN), after the social networking website operator forecast sales that came below analysts’ estimates.

The Beijing-based company tumbled 9.8 percent in New York yesterday as the Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slipped 1.1 percent to 97.13. Renren’s stock has plunged 76 percent since its May 2011 debut, when it was valued at more than double Facebook Inc.’s multiple. E-Commerce China Dangdang Inc. (DANG), the country’s biggest online bookseller, fell the most in a week.

Renren said yesterday that first-quarter revenue will be no more than $25 million, below the $30.4 million average estimate of three analysts compiled by Bloomberg. Mergers and acquisitions as well as mounting competition will erode Renren’s earnings, CM Research said. Baidu Inc., owner of China’s biggest search engine, bought a 59 percent stake in Renren’s Nuomi.com group buying site in August, about a month after announcing it will acquire 91 Wireless Websoft Ltd.

“The general trend is against Renren,” Cyrus Mewawalla, an analyst at CM Research, an investment and research company based in London, said by phone yesterday.“This company is experiencing difficulties as the industry is consolidating.”

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., slid 1.6 percent to $33.10. The Standard & Poor’s 500 Index fell 0.6 percent as the Federal Reserve reduced its monthly bond buying to $55 billion and more central bank officials predicted interest rates would rise by the end of next year.

Shrinking Sales

American depositary receipts of Renren slid to $3.40, the lowest in three weeks. Renren’s first-quarter revenue will drop 46 percent from a year earlier, following a 37 percent tumble in fourth-quarter sales, the company said in a statement. Revenue from online advertising declined 18 percent in the quarter while net revenue from games plunged 40 percent.

At its $14 IPO price in 2011, Renren was valued at 72 times the previous year’s sales, compared with 25 times at the time for Facebook, which has jumped 78 percent since its May 2012 debut. Baidu Inc. (BIDU) may increase its investments in Nuomi.com, U.S. Global Investors Inc. said in October.

The Fed said yesterday it will reduce the monthly pace of bond purchases by $10 billion. The central bank will look at a wide range of data in determining when to raise its benchmark interest rate from zero, dropping a pledge tying borrowing costs to a 6.5 percent unemployment rate.

Beijing-based Dangdang fell 6.7 percent to $15.81. Trading volume was 1.6 times the 90-day average, data compiled by Bloomberg show. Noah Holdings Ltd., a wealth management company based in Shanghai, jumped 5.6 percent to $16.60.

The Shanghai Composite Index (SHCOMP) declined 0.2 percent to 2,021.73 yesterday. The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong added 0.2 percent to 9,360.70.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Tal Barak Harif at tbarak@bloomberg.net Marie-France Han, Rita Nazareth

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