To split or not to split: Renren struggles with Renren Games
Renren’s stock (NYSE:RENN) took quite a jump earlier this week when rumors linked the company’s money-hemorrhaging group buy subsidy Nuomi with a Baidu buyout, but now it’s on its way back down again and the company faces the same issue it has been struggling to resolve all year: where to go from here.
As the mobile market continues to expand and users adopt WeChat and move even further away from traditional SNS like Renren, it’s clear that Renren’s social platform probably isn’t the company’s future. Previously, Renren CEO Chen Yizhou had planned to split off Renren Games and have that company IPO on its own while Renren itself delisted and refocused its energies a bit.
The problem with that plan now is that as Renren continues to lose money, it’s not in a great position to separate itself from Renren Games, which is one of its few sources of stable income. The Renren Games team, for its part, is reportedly fed up with having to carry the weight of less lucrative projects like Nuomi and wants to accelerate the split, but it holds such a small share of China’s gaming market at present that there are serious questions about how long it could really last on its own. Moreover, with Renren’s other endeavors not making much money, splitting off Renren Games could utterly decimate Renren’s stock price if it’s done before Renren is able to privatize and delist.
Chen is reportedly hesitant to make any decision, but whether he decides to keep or split off Renren Games, his company faces a tough road. A Baidu buyout of Nuomi, if it actually happens, would alleviate some of the pressure, but at the end of the day Chen is still going to face a difficult decision unless Renren Games can up its output significantly and start producing some games — Android games, especially — that can make a real splash.
A Renren Games employee recently told Tencent Tech that the company has yet to produce a mature Android game that it can confidently promote to the outside world. Until it does, Chen Yizhou’s Renren is likely to stay stuck between a rock and a hard place.
(Tencent Tech via TechWeb)