A social media networking service, Renren, marketed as the “Facebook of China” in 2011 with an IPO on the New York Stock Exchange, has become an investor nightmare over time.
The company founded in 2005 has its stock gone down by 90% since the listing with $5 billion value wiped out. Although the founder and CEO of Renren, Joseph “Joe” Chen, hasn’t lost his motivation for doing business one bit. He sits on the SoFi board, the company that has been facing problems of its own.
So who owns the student loan refinancing company now?
Mike Cagney, SoFi Chairman
Mike Cagney, SoFi Chairman and CEO of the board, has resigned from his position due to the sexual harassment scandal. While most of the board members are preoccupied with this scandal, Joseph Chen and a couple of companies are working together to take out the stake of Renren in SoFi. David Chao of DCM Ventures and David Thevenon of SoftBank are involved in this deal.
Social Finance, Inc. (SoFi), an American online personal finance company, was founded in 2011 in San Francisco by four students, namely Ian Brady, James Finnigan, Dan Macklin and Mike Cagney, who connected at Stanford Graduate School of Business. In 2012, SoFi became the first company to refinance federal and private student loans with the introduction of student loan refinancing.
SoFi's growing role in financial services
Currently, the company has broadened its scope to provide services like banking, credit cards, personal loans, mortgages, investment, and student loan refinancing. These services of SoFi are accessible on their mobile app and desktop interfaces.
Joseph Chen is creating a deal in which shareholders who are qualified purchasers and accredited investors will be able to exchange their Renren shares for getting ownership in the spinoff entity. This will consist of the investment portfolio and stake of Renren in SoFi. Meanwhile, the other shareholders will get paid in cash upon review by the Renren board special committee.
What’s ahead for Sofi and Renren
As per the plan for the spinoff entity, the current owners of Renren’s stock, including DCM Ventures at 8.6%, SoftBank at 39% and Joseph Chen at 31%. Further, it will increase their holding SoFi. After that, most individual retail investors who own the remaining 20% of Renren as shareholders will be losing out on being part of SoFi. They will instead get a soon-to-be decided dividend and a holding in the ever-declining Renren.