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Renren Plans Private Placement of Subsidiary; Stock Continues to Slide

Anna Vodopyanova 2018-11-19 14:52 PM
Renren Plans Private Placement of Subsidiary; Stock Continues to Slide

The stock of Renren Inc. (NYSE: RENN) dropped for the second day in a row after the company announced it would pay a cash dividend to shareholders after its subsidiary, Oak Pacific Investment (OPI), undertakes a private placement and separates from its parent.

In response to concerns that the company could be deemed an investment company, Renren issued a statement on Monday saying it would offer the newly issued shares of its subsidiary OPI to qualifying shareholders. The company said it expected OPI's private placement to close on June 14.

Investors reacted negatively to the news with the company&`#`39;s shares losing 12 percent Monday and trading at $8.41 per share in afternoon trading today, down an additional 6 percent.

As part of the private placement, Renren said that it had transferred to OPI "a significant portion of its assets, including shares in 44 portfolio companies, interests in six investment funds, and the advertising agency business operated by one of Renren&`#`39;s subsidiaries."

The transaction was intended to relieve Renren from a potential "investment company" status under scrutiny by the Securities and Exchange Commission, according to the company. 

Renren literally means "Everyone." Among its software and networking services are the Facebook-like social network of China, Renren Network, and Trucker Path, the most popular app for truckers in the United States.

Upon completion of the private placement, Renren will no longer have a stake in OPI, but will hold a note of $90 million from the company, which carries an annual interest rate of 8 percent.

Consequently, Renren said it would pay a cash dividend to its shareholders of record as of May 18. The last date to purchase ADSs to participate in a cash dividend is May 16. The payout would be equivalent to the purchase price of the shares of OPI, which Renren said it expected to be between $7.25 and $9.14 per American depositary share.

Renren's largest shareholder, SB Pan Pacific Corp., a subsidiary of SoftBank Group Corp., the Japanese holding company that has a stake in companies including Uber Technologies Inc., Sprint Corp. (NYSE: S), and Alibaba Group Holding Ltd. (NYSE: BABA), has already approved the transaction.

Renren said OPI had no plans to go public.

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After announcing the private placement on Monday, Renren lost 12 percent. 

The stock continued its drop today, and was down an additional 6 percent in afternoon trading. (Source: Thomson Reuters Eikon)