Shanda forced to cut IPO size
Shanda Interactive Entertainment has slashed the size of its initial public offering by 49 per cent, reflecting tough market conditions and concerns about slower growth in the mainland economy.
The Shanghai-based online gaming company has raised US$152.35 million through its Nasdaq listing, compared with an earlier target of $298.73 million.
Pricing was set at US$11 per American depositary receipt (ADR), lower than the previously indicated range of $13 to $15.
Shanda shares debuted in New York yesterday at US$11.11 and immediately shot up to $12.50. By late morning, the counter was trading at $11.75.
KGI Asia Securities associate director Ben Kwong said fears the United States Federal Reserve could raise interest rates soon were weighing on the market. In addition, efforts to slow the mainland economy had hampered the listing attempts of Chinese companies.
'All this means any IPO will be difficult unless they offer at a very attractive price,' Mr Kwong said.
China Shipping Container Lines has reduced the size of its offer to US$1.3 billion to $1.5 billion, while mainland foundry CSMC Technologies has cut the size of its planned IPO by half to $100 million.
Shanda sold 13.85 million ADRs, compared with its previous goal of 19.91 million. Insiders collected US$46.31 million, or 30.39 per cent of the offer, while $106.04 million went to the company.
Existing shareholders unloaded fewer shares than planned - in part to overcome fears they were using the IPO to cash out. Shares to be sold by Skyline Media - the holding company of chief executive Chen Tianqiao, senior vice-president Chen Danian and director Luo Qianqian - and SB Asia Infrastructure Fund originally accounted for 44.3 per cent of the offer.
Shanda paid Skyline and SB Asia a US$23.2 million special dividend on April 29, but said buyers of the IPO should not expect any similar payouts in the future.
At US$11, Shanda will have a US$768.12 million market capitalisation, or 15 times forecast earnings this year and 12 times next year.
This compared with a forward ratio of 20.86 times for NetEase. com this year and 15.19 times next year.
CLSA analyst Frank Shi said new-economy stocks were trading at old-economy valuations because US investors were less comfortable with Chinese internet companies, although Americans' familiarity with technology plays was one reason mainland firms favoured the Nasdaq for fund raising.
'The [short-message market] and online games are not very familiar because you can't find similar success stories in the US,' Mr Shi said.
Goldman Sachs led the IPO, while Bear Stearns, CLSA/CIBC World Markets, HSBC and Piper Jaffray were co-sponsors.
