Why Renren Inc. Stock Jumped 13% in September

By Markets Fool.com

Image source: Renren.

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What happened

Shares of Renren Inc. (NYSE: RENN) were running higher last month, climbing 13% according to data from S&P Global Market Intelligence. The stock jumped toward the end of the month on a plan to spin off some parts of its business:

RENN data by YCharts.

So what

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The Chinese social-media company once known as the "Facebook of China" said that it would "spin off a newly formed subsidiary ... that will hold the company's social video platform woxiu.com and most of the company's investments in minority stakes in privately held companies."

The stock surged 8% on Sept. 30 as Renren announced the move, which is essentially a defensive play -- the company said it wanted to minimize the risk it could be deemed an "investment company" and therefore be subject to different rules.

Now what

The market tends to cheer spinoffs, especially when they're from a troubled stock like Renren: Its shares have fallen nearly 90% since its 2011 IPO.

The stock soared again on Oct. 4, gaining 20% as the company confirmed the spinoff, but it gave back those gains in subsequent sessions. I'd expect continued volatility as the stock remains challenged, with or without the spinoff.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.