Shanda Delists: Thanks for the Profits 盛大网络退市：获利可喜

By newsdoug on February 15, 2012

Game over for Shanda with successful delisting Anyone who invested in Shanda Interactive (Nasdaq: SNDA), China’s first online game company to go public, must surely be happy by the ending to the company’s story as a publicly traded firm, which officially comes today with its delisting from the Nasdaq following a successful privatization bid. From my own observer’s perspective, I’m also quite welcoming of this delisting, as Shanda’s core online game business is already well represented for investors by its separately listed game unit, Shanda Games (Nasdaq: GAME); thus this delisting will remove a duplicate company from the market that only serves to confuse investors with the kinds of accounting tricks that Chinese firms need to stop to restore credibility to their tarnished reputation. Let’s look quickly at this final chapter of publicly traded life for Shanda, which officially ended on Tuesday when shareholders approved a generous takeover offer led by the company’s deal-making founder, Chen Tianqiao. (company announcement; Chinese article) Under that deal, shareholders will get $41.35 for each American Depositary Share (ADS) they hold, representing a handsome 275 percent return for anyone who initially bought the company’s ADSs for their IPO price of $11 when Shanda went public in 2004. Since then Shanda’s shares have gone on a roller coaster ride that saw them rise as high as $55 in 2010, only to sink to $32 last year amid a series of accounting scandals at US-listed Chinese firms. Amid all that, the company spun off Shanda Games and was planning to spin off its online literature unit, called Cloudary, last summer before indefinitely scrapping the offer when market sentiment plummeted. From an investor perspective, the delisting of the parent Shanda Interactive, which aspires to become a diversified entertainment company, should be a welcome development, as it will greatly simplify this company by only listing each of its individual business units, while removing a parent company whose own financial results were essentially double-counting the performance of each of those units. This kind of double counting is relatively common among not only Chinese but also Hong Kong companies, and represents the kind of games that are one of the biggest risks for investors when buying Chinese stocks. So I congratulate Chen on this new delisting, even though I doubt his motivations are so pure. Instead, Chen has indicated he may try to list Shanda Interactive on a domestic Chinese stock market, most likely China’s Nasadaq-style ChiNext or its planned international board in Shanghai. But I wouldn’t look for that offering anytime soon, certainly not this year though possibly in 2013.

Bottom line: Shanda Interactive’s successful delisting marks a positive move for better transparency at US-listed Chinese firms, and could presage a re-listing on a Chinese exchange as soon as 2013.

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