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Is Shanda Games' CEO Resignation Reason for Concern?

|Includes:Shanda Games Ltd (GAME), SNDA
Investors sold Shanda Games (NasdaqGS: GAME) shares heavily after company announcement that CEO Ms. Diana Li has resigned. Investor anxiety likely stemmed from two concerns. First, was there more to the resignation story? Second, will company’s business be impacted?

As more facts have been made public, I believe the answers to both questions are a resounding No.

Most people have known that Diana Li resigned as CEO of Shanda Games to pursue other business interests. It appears that some have interpreted this as an excuse and figured there could be more behind the story.

But Ms. Li has now revealed more details to her plan after Shanda Games. She and her husband are launching a new business. The couple plan to make public the specifics of their new business one year later, although the products should be available in half a year. The new business is related to applying internet to certain traditional industries.

At this stage, Ms. Li’s new company has completed first round of capital raising. According to her, Mr. Tianqiao Chen, Chairman, CEO and President of Shanda Interactive (NasdaqGS: SNDA, Shanda Games’ parent company and majority shareholder), and his wife support her new endeavor and will be investors in the business too.

She has also made it clear that the new business will have nothing to do with online gaming. So, this removes the possibility of Ms. Li becoming Shanda Games’ new competitor.

Ms. Li was not a founding member of the company and her online gaming management skill was entirely nurtured by Shanda Games and its predecessor Shanda Interactive. So, I expect her departure to have little impact on company’s business continuity. In particular, company has immediately installed Mr. Qunzhao Tan, company’s co-founder and Chairman, as CEO. Mr. Tang and other senior management members possess all the skill, knowledge and insight to continue Shanda Games’ growth down the road.

Disclosure: Long GAME and SNDA
Stocks: GAME, SNDA