Chinese social-network operators Renren Inc. (NYSE:RENN) and Sina Corp. (NASDAQ:SINA) won’t be able to rely on Facebook’s initial public offering to give their shares a boost for much longer, as both companies face challenges in the advertising realm, according to Maxim Group LLC.
Renren and Sina saw their shares rise on February 2, the day after Facebook announced plans to raise $5 billion in an IPO this year. But their own challenges may soon offset those gains.
“There could be a short-term bounce from the Facebook IPO, but it’s not sustainable,” said Echo He, a New York-based analyst for Maxim Group. “Renren has a lot of promise, but online advertising dollars are hard to make in China. Advertising in China is still TV dominant.”
Despite analyst reports that Renren is not expected to be profitable this year, the Beijing-based company has seen American depositary receipts climb 49 percent this year. Shanghai-based Sina has gained 36 percent to erase its 2011 24 percent drop.
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