Dallas, Texas 07/07/2015 (Financialstrend) – Renren Inc (NYSE:RENN) is in the process of finalizing modalities that will see it go private having received a non-binding preliminary agreement for the same. The move by Renren to go private comes on the heels of massive exodus by Chinese companies from the US stock exchanges.
Chinese Companies Exodus
Renren Inc (NYSE:RENN) joins the likes of Sungy Mobile, online dating platform Jiayuan and Xueda that has already confirmed go-private offers. Shanda Games an online game developer accepted a $1.9 billion buyout offer in April and consequently went private.
Chief financial executive officer and COO James Liu have reached an agreement to acquire the remaining stakes in Renren Inc (NYSE:RENN) that they currently do not own. The executives plan to spend $4.20 in cash for each American depositary share to acquire the remaining stakes. The proposed acquisition price represents a 22% premium of the ADS over the past 30 days.
Mr. Chen and Mr. Liu currently own about 32% of Renren Inc (NYSE:RENN)’s shares with 49% of shareholder voting power. The go private transaction involves a combination of debt and equity offer.
Dubbed the Facebook Inc. (NASDAQ:FB) of China, Renren has struggled to grow its user base and as a result, shed almost 70% in value since 2011. Millenials opting for smartphone apps such as WeChat and Jiecao has been the biggest undoing for Renren Inc (NYSE:RENN) in the industry.
Ease of Security Requirements in China
Chinese companies have always preferred the US stock exchange because it does not have rigorous Securities laws compared to China’s. A two-tier shareholding system in the US has also acted as a catalyst to Chinese companies preferring the US market.
However, Chinese authorities are reportedly considering abolishing the profitability requirement before a company files for an IPO. The move is expected to encourage more companies to tap into the country’s public market instead of going abroad.