Shanda aims to raise US$200m through Nasdaq listing
Shanda Interactive Entertainment hopes to shrug off the troubles of other recent mainland initial public offerings by raising US$200 million through a listing on the Nasdaq Stock Market.
The mainland's largest operator of online games plans to spend US$65 million to develop or acquire new titles and $25 million to enhance its operational platform, according to the company's preliminary prospectus. It will also spend about $60 million to acquire or invest in related businesses.
The public offer comes at a time when other mainland share sales, such as those of Tom Online and Semiconductor Manufacturing International Corp, have flopped.
Investors, however, are likely to be drawn to Shanda's rapid growth. It had 272.9 million yuan in earnings last year, up 95.9 per cent from 2002, while revenue was 83.9 per cent higher at 600 million yuan.
Goldman Sachs is leading the share sale and the other underwriters are Bear Stearns, CLSA/CIBC World Markets, HSBC and Piper Jaffray.
Shanda aims to launch four new multi-player, role-playing games this year as part of efforts to continue growing revenue while reducing dependence on its key titles - Legend of Mir 2 and World of Legend - which accounted for 87.5 per cent of revenue in the first quarter.
The Sign, a self-developed game, was released for testing on February 18 and attracted 18,430 average concurrent users in the first 30 days of its launch. Another in-house title, Age, is scheduled for testing in the second quarter. Also on the drawing board is Magical Land, a self-developed game, and DO, a licensed title.
Whether the new games are a hit remains to be seen. According to a report by Goldman Sachs, the industry success rate for new titles is about 10 per cent to 20 per cent.
Shanda unveiled three games for testing last year but just one - World of Legend - has been successful, reaching 240,395 average concurrent users in the first quarter. Tactical Commanders had just 1,547 average concurrent users, while Lord of Heroes 2 was never commercially launched.
There are several risks with the share offer, primarily the legal action brought by South Korean game developer Wemade. The dispute involves Mir II and World of Legend and if Shanda is forced to drop the games, its business could be adversely effected.
Investors in the offering should also not count on a dividend, although a US$23.2 million payout to existing shareholders was declared on March 5.
'We currently intend to retain all available funds and any future earnings,' Shanda said.