BIRMINGHAM, Ala., July 24, 2015 /PRNewswire/ -- The following is an open letter sent July 24, 2015 to the Board of Directors of Renren Inc. from private investors.
We trust that the special committee of independent directors formed by the Renren Board will REJECT the non-binding, and egregiously low proposed offer of US$4.20 in cash per American Depositary Share ("ADS"). The offer from Mr. Joseph Chen ("Chen"), Chairman and CEO of Renren, and Mr. James Jian Liu ("Liu"), a Board member and COO of the Company, is to acquire all the outstanding shares not already owned by the two parties.
The "going private" proposal significantly undervalues Renren Inc. and we implore the special committee to focus on legal principles and the fiduciary duties OWED to ALL shareholders in OBJECTIVELY evaluating the non-binding offer from Chen and Liu. These guiding principles include, but are not limited to, the following: (1) A company director must act in good faith; (2) Without exception, a company director must act in the best interest of the company as well as ALL shareholders in all his company dealings and exercise his powers in the best interest of the company and ALL shareholders; (3) a company director MUST act with skill, care and diligence. Furthermore, the 22% premium offered above the average closing price over the last 30 trading days up to and including June 9, 2015, is completely irrelevant and a complete ruse as it is based on a depressed relative valuation of where Renren has traded over the short to intermediate term, rather than an absolute value based on its underlying assets.
Renren's struggles to monetize its China SNS user base are well documented over the past 4 years and the purpose of this letter is clean and not to rehash what is widely known. Despite those shortcomings, we commend management on their ability to utilize the large cash balance sheet to make Fintech related investments that have created tremendous value not reflected on its balance sheet nor the most recent share price(s). In addition, we share the vision that Renren can create tremendous value as an online financial services business rather than just a pure-play China SNS. Please consider an analysis of the most significant assets in the 20-F filing dated April 16, 2015.
- 24% stake in Social Finance, Inc ("SoFi"), a leader in P2P online marketplace lending who offers a highly differentiated and coveted platform with an emphasis on student loans. SoFi, is the #2 online lender based on originations just behind #1 Lending Club who has a market cap of $5.5 B. SoFi has publicly stated their intent to go public in the next year and it would be logical to assume it would have a market cap similar to Lending Club when it commences trading.
- Cash, cash equivalents and short term investments of $400MM+
- Long term and VC investments (exclusive of SoFi's cost) of at least $450 MM+. Renren has made 25+ investments where over half are FinTech related and half are in the domestic US. Renren is making a global play on the FinTech revolution, it is far from just a China play and in many ways is diversified away from the recent China market volatility.
- Renren has 40MM+ active monthly users with an emphasis on the college aged demographic. This is a massive base of organic traffic, and competitive advantage, which should allow Renren an inexpensive way to acquire customers for their internet financial services products.
Clearly, the $4.20 per ADS offer by Chen and Liu ($1.428 Billion valuation on roughly 340MM ADS outstanding) is offensive and ludicrous. In fact, when utilizing information available in the public domain, one could reasonably and realistically value Renren's SoFi stake alone, exclusive of the other aforementioned assets, at $1 B when it hits the public markets. Investors have SUFFERED mightily by way of Renren's depreciating market cap and management's inability to monetize the user base and galvanize subsequent restructuring under Chen and Liu. Now just when the new internet finance products and investment portfolio are showing promise, Chen and Liu are attempting to capitalize for personal gain solely at the expense of ALL shareholders. This posturing is not only in opposition to Chen and Liu's fiduciary duty to ALL shareholders, but is appalling considering the public track record since its 2011 IPO. Consequently, the special committee of independent directors MUST use their best IMPARTIAL judgement and REJECT this non-binding offer as it is clearly not in the best interest of ALL shareholders.
SOURCE Romero Small