Shanda Games Ltd. Leads the IPO Pack

| About: Shanda Games (GAME)

Shanda Games Limited (NASDAQ:GAME), the online spinoff of Shanda Interactive, is this week's largest expected IPO. The company hopes to raise up to $819 million, according to MarketWatch.

Business Overview (from prospectus)

We are China’s leading online game company in terms of the size and diversity of our game portfolio. Our online game revenues and game player base are also among the largest in China. Through our extensive experience in the online game industry in China, we have created a scalable approach to develop, source and operate online games, as well as license our games to third parties. We use multiple channels to assemble a large and diversified game portfolio of various genres. We operate a nationwide, secure network to host hundreds of thousands of game players playing simultaneously, and monitor and adjust the game environment to optimize our game players’ experience.

Offering: 63 million shares at $11-$13 per share. According to the company's F-1 filing with the SEC, the company expects net proceeds of approximately US$140.6 million, which will be used for general corporate purposes, including capital expenditures and funding possible future investments, joint ventures and acquisitions

Lead Underwriters: Goldman Sachs (Asia) L.L.C. (NYSE:GS), J.P. Morgan (NYSE:JPM), Nomura Securities

Financial Highlights:

Our net revenues increased 11% from RMB1,040.0 million for the quarter ended March 31, 2009 to RMB1,158.5 million for the quarter ended June 30, 2009. Net revenues from MMORPGs increased from RMB946.8 million to RMB1,079.3 million. Net revenues from advanced casual games decreased from RMB87.6 million to RMB72.2 million...Our cost of revenues increased 13% from RMB414.7 million for the quarter ended March 30, 2009 to RMB466.4 million for the quarter ended June 30, 2009... Our operating expenses increased 16% from RMB224.7 million for the quarter ended March 31, 2009 to RMB261.1 million for the quarter ended June 30, 2009... As a result of the foregoing, our operating income increased 8% from RMB400.6 million for the quarter ended March 31, 2009 to RMB431.0 million for the quarter ended June 30, 2009. Our operating margin decreased from 38.5% to 37.2%.


We compete primarily with other online game developers and operators in China, including Limited (NASDAQ:CYOU), Giant Interactive Group, Inc. (NYSE:GA), Kingsoft Corporation Limited, NetDragon Websoft Inc. (OTC:NDWTF), (NASDAQ:NTES), Nineyou International Limited, Perfect World Co., Ltd. (NASDAQ:PWRD), Tencent Holdings Limited (TCEHF.PK) and The9 Limited (NASDAQ:NCTY). We also compete with other private companies in China devoted to game development or operation, many of which are backed by venture capital funds and international competitors. Competition may also come from international game developers and operators, such as Activision Blizzard, Inc. (NASDAQ:ATVI), Electronic Arts Inc. (ERTS), NCSoft Corporation, Nexon Corporation and Webzen, Inc (WZEN)

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