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Chinese social networking firms eye US IPO gold

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CIOL Bureau
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SHANGHAI, CHINA: One of China's largest social networking companies, Oak Pacific Interactive, has hired investment banks for an initial public offering in the United States next year, the first in a rush of Chinese Facebook clones looking to list.

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Oak Pacific Interactive has hired Credit Suisse Group AG and Deutsche Bank AG to underwrite its IPO slated for the first half of next year, sources close to the matter told Reuters on Friday.

The firm owns China's largest online social networking site Renren and Nuomi, similar to the popular U.S. website Groupon featuring daily deals and entertainment community Mop.

TaoMee, a social networking site for children, was also planning to list late next year and would conduct its "beauty parade" for investment banks in the first quarter of 2011, said a source familiar with the situation.

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Social networking site Kaixin001 also plans to list but has not gone through the process of selecting banks, said the source, who declined to be named as the matter was not public.

Chinese IPOs in the United States have hit a record high of 35 this year. Based on the number of offerings, Chinese issuers account for 23 per cent of U.S. market IPO activity, up from 1 per cent in 2000, according to Thomson Reuters data.

The Chinese social networking firms will be following in the footsteps of online video site operator Youku and online retailer Dangdang , which saw their stocks soar in this week's debuts.

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Youku's triple-digit first-day pop was the biggest since 2005, when Baidu Inc rose 354 percent, data from the New York Stock Exchange showed.

A source said the amount to be raised by OPI had not been finalised. OPI and the banks declined to comment.

Social networking sites have grown in popularity in China in recent years, garnering most of their revenue from online advertising. They also benefit from an ecosystem closed to major foreign competition. Facebook and Twitter are banned in China.

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But the market is increasingly competitive with more than 100 social networking sites operating. Two social networking sites shut earlier this year due to cash flow issues, local media reported.

The industry is also fraught with regulatory and legal risks as China seeks to control the flow of information online.

China is the world's largest Internet market by users at 420 million. About half of them use social networking sites, government data showed.

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