Monday, January 30, 2012

RenRen (RENN) - If the Facebook IPO Hype Isn't Enough, Try "China's Facebook."

RENN is trading $6.09, up 15.9% with IV30™ up 19.9%. The LIVEVOL® Pro Summary is below.


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Renren Inc. (Renren), formerly Oak Pacific Interative, incorporated in February 2006, is a social networking Internet platform in China. Renren generates revenues from online advertising and Internet value-added services (IVAS).

This is a vol note along with order flow. The news pushing the volume, vol and stock is quite simply, Facebook. Here's a news snippet with some interesting comps:


According to multiple reports, the online social media giant Facebook is expected to file for its much-anticipated IPO next week, seeking a valuation of between $75-$100 billion. It has also been estimated that the company generated revenue somewhere in the range of $4.0-$4.5 billion in 2011. So, should Facebook start with a market cap of $87.5 billion -- the mid point of what is expected -- and if it generated revenue of $4.25 billion last year, this would give it a P/S of about 20.5x. Its sales in FY11 were said to more than double from 2010's $2.0 billion.

For the sake of comparison, LinkedIn (LNKD) had a P/S of over 38x when it went public back on May 19, 2011. Of course, LNKD has since pulled back, and is now trading with a trailing P/S of around 16x. Renren (RENN), which is known as "China's Facebook", is now trading with a P/S of about 20x.

Source: Provided by (

On the news RENN has traded just under 50,000 contracts on total daily average option volume of 3,788. Feb 6 calls have traded more than 10,000x while the Feb 7 put shave traded just under 6,000x.  It seems like the pubic at large is buying premium in RENN -- betting on more huge movement in the near-term.  The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Feb 6 calls and Feb 7 puts are mostly opening (compare OI to trade size). The puts feel like purchases, the calls seem a bit more ambiguous given the trade prices.

The Skew Tab snap (below) illustrates the vols by strike by month.

We can see a noticeable spread between each of the front three months with the front expos showing higher vol. We can also see the front month has a parabolic skew with the upside calls reacting to that order flow -- circumstantial evidence that the calls in Feb are purchases.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

Check out the stock pop over the last two days, up 46.3% as of this writing. On the vol side we can see the implied has popped to outpace the HV20™. IV30™ is up 71.3% (not percentage points) in those same two days.

All in all it's been some pretty fantastical movement (stock and vol) of late. If the IPO Facebook hype isn't enough, try "China's Facebook." Crazy. A lot...

This is trade analysis, not a recommendation.

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1 comment:

  1. FB seems to be a good company as of now as Orkut looked once upon a time. It may happen that it continue to be at this level for longer duration but it is not certainly long tern affair to invest in it. Buy IPO and then keep on booking profits at shorter intervals. Dont think this issue as 5-10-15 years affair.