Renren Getting Walloped on Heavy Volume After Rally on Facebook Hype

Shares of Chinese social networking company Renren RENN have been very active on Wednesday as traders take profits in the wake of a run up in the share price in advance of Facebook's anticipated IPO. The stock rallied sharply on Friday afternoon and then soared on Monday. On Tuesday and Wednesday, however, the stock has been falling on heavy volume as the move appears to have been overdone in the market's eyes. During today's session, RENN has fallen 8%. Volume has been massive with more than 19.3 million RENN shares trading hands compared to a 3-month daily average of 5.6 million. Initially, traders pushed up the stock on the hype surrounding Facebook's planned IPO, which could give the company a valuation of $100 billion. While Facebook's grand splash into the public markets has helped to shine the spotlight on other social networking companies such as RENN, the activity in the stock is mostly based on hype and speculation - Facebook going public is not going to substantially benefit Renren's business. The other factor causing the recent volatility in RENN shares is its massive short interest, which is over 55%. The activity of short sellers covering their bearish bets undoubtedly had something to do with the big pop in RENN on Friday and Monday.