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Private Investors To Renren: There's 120% Upside If Go-Private Offer Is Rejected

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Private Investors To Renren: There's 120% Upside If Go-Private Offer Is Rejected
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  • Private investors sent a letter to Renren Inc (NYSE: RENN)’s Special Committee, Board of Directors and all of the company’s shareholders on Friday.
  • The letter rejected the outstanding go-private offer from Renren executives.
  • Shares of Renren fell slightly after the letter was published.

In the letter, private investors led by John Romero and Patrick Small implore Renren’s Special Committee to “REJECT the extremely low privatization offer” of $4.20 per share made by CEO Joseph Chen and COO James Jian Liu.

According to a sum-of-the parts analysis cited in the note, the company’s fair value is $6.72 per share. That's well below current share prices by nearly 120 percent.

The analysis, from the PR:

screen_shot_2015-09-26_at_12.09.59_pm.png

Romero and Small explain that the existing offer makes it impossible for current Renren shareholders to realize the potential of the company's "promising" VC portfolio, which includes over 25 companies and $500 million worth of investments.

These have "windfall" profit potential, they add.

In strong language, the letter states Chen and Liu are “attempting to enrich themselves to the detriment of ALL OTHER SHAREHOLDERS.”

What's Unique About Renren

Near the end of the analysis, Romero and Small discussed a peer group of ten other Chinese buyout candidates. They discovered Renren is the only of this group to:

1. Not hire outside advisors to evaluate its privatization proposal.

2. Not hold a conference call after its last earnings report.

Because of this, Romero and small call on Renren to be mindful of its "fiduciary duties" to existing shareholders and consider the company's full valuation.

The rest of Romero and Small's analysis is available here.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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