Shanda wins $1 billion in the IPO game

Posted Sep 25th 2009 10:00AM by Tom Taulli
Filed under: China, JPMorgan Chase (JPM), Goldman Sachs Group (GS)

One of the fastest growing sectors in the Chinese economy is online gaming, and, the leading player in the market is Shanda (NASDAQ: GAME).

With much investor anticipation, the company's shares hit the U.S. market today in a big-time IPO. The company priced 83.5 million shares at $12.50, making it a billion-dollar offering (the only one this year)

Shanda has a variety of games -- including 20 multi-player online role-playing games (MMORPGs) and 11 advanced casual games. In fact, there are plans to launch 16 more MMORPGS and eight advanced games.

To encourage more innovation, Shanda even has its own investment arm, called 18 Capital. It has been helpful in encouraging online game development.

There are roughly 9.73 million active paying accounts. Basically, this means a player spends virtual currency on a game item (like a pick, gun, potion, etc). The prices range from $0.01 to $1.47. Although, there are some cases where an item will fetch more than $100.

All in all, the business model is priceless. For the first half of this year, Shanda posted a 43% increase in revenues to $321.9 million, with a net profit of $98.3 million.

More importantly, the growth should continue apace. A study from IDC indicates that China's online gaming revenues should grow from $2.7 billion in 2007 to $5.8 billion by 2013.

The underwriters on the Shanda deal include Goldman Sachs (NYSE: GS) and JP Morgan (NYSE: JPM).

Tom Taulli is the author of various books, including The Complete M&A Handbook and has a site at IPOProfiles.com.

Tags: featured, game, IPOs, Shanda Games, ShandaGames