Shanda to issue US$150m convertible bonds
By Liu Baijia (China Daily)
Updated: 2004-10-15 10:39

Chinese online game operator Shanda Interactive Entertainment Ltd will raise US$150 million from offering senior convertible bonds to the public, as its aggressive campaign of acquisitions continues.

The company, whose stock prices have more than tripled since its initial public offering (IPO) on the NASDAQ in May, said yesterday that it will issue US$150 million of such bonds, and the underwriter will also have an option to sell US$50 million of the bonds.

"Shanda's stocks performed very well since our IPO and were recognized by the capital market," said Zhou Donglei, director of investor relations at Shanda.

"We believe this is a good time for us to make this move."

She said the proceeds will be used for working capital, potential acquisitions and investments and other general corporate purposes.

Shanda may also use part of the proceeds to repurchase up to US$50 million worth of ordinary shares from its second biggest shareholder SB Asia Infrastructure Fund LP.

Shanda's biggest stake holder is its founder, chairman and chief executive officer Chen Tianqiao, who was ranked as the second most influential business leader in China by Forbes magazine last week.

Zhou said part of the proceeds will be used for more acquisitions.

The Shanghai-based company has made four acquisitions and investments in the past three months.

Shanda did not disclose details on when and at what prices the bonds can be converted into its stocks.

Jim Sun, an analyst with the UK-headquartered Evolution Securities, believed that the issuance of the convertible bonds will help the company gain more capital for its future development.

He said Shanda's IPO price was only US$11 and did not raise as much as capital it was worth, so the issuance of bonds is a good choice for the company.

Cheng Lingfeng, a Beijing-based Internet analyst, also believed that Shanda's enthusiasm for acquisitions means the company is in need of huge capital reserves, so an issuance of bonds is very helpful, especially when its stock prices are almost at the highest point in its history.

Shanda's American depository shares closed at US$33.64, up 2.53 per cent on Wednesday, but lost 1.75 per cent in after-hours trading.

Sun pointed out that using part of the proceeds for a repurchase of SB Asia Infrastructure Fund's shares is also a smart move, as the frozen period of SB Asia Infrastructure Fund's shares will terminate in November and the repurchase will help stabilize the stock price.

Shanda is also partnered with Shanghai-based e-commerce company Eachnet under the US online bidding giant eBay.

Eachnet will act as the designated website for the trading of Shanda's game players and both companies will work together to make sure of fair trading on Eachnet's platform.

Many game players usually buy virtual weapons or tools in games, even at a price of thousands of dollars, but cheats and fake products are a headache for many game operators.

Eachnet also promised to put advertisements on Shanda's websites in the next two years, which will contribute significantly to Shanda's online advertising revenues.

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