Shanda Games, a Shanghai-based provider of online games, plans to price its IPO of 63 million American Depositary Shares (ADS) at $10.50 to $12.50 each to raise $750 million. The company will offer 13 million ADS and selling shareholders will offer 50 million ADS.
The company is being carved out from Shanda Interactive Entertainment Limited (NASDAQ: SHDA), a Shanghai-based interactive entertainment media company, which will control about 97.3 percent of GAME after the offering.
People are comparing Shanda Games to Changyou.com (NASDAQ: CYOU), another China-based provider of online games that skyrocketed this year. On Feb. 4, 2009, Changyou.com priced its IPO of 7.5 million ADS at $16 each. The stock closed on Friday, Sept. 18, at $38.75 — UP 142.2 percent from its initial offering price.
Let’s take a closer look at the two.
- Changyou.com reported net income of US$143.1 million on revenues of US$271.1 million for the 12-month period ending June 30, 2009. At current levels, Changyou.com is trading at 14.6 times its last 12 months earnings of US$2.66 per share.
- Shanda Games reported net income of US$179.2 million on revenues of US$540.8 million for the 12-month period ending June 30, 2009. At the mid-point of its proposed price range, Shanda Games would be trading at 17.7 times its last 12 months earnings of 65 cents per share.
The IPO handicappers are pegging Shanda’s opening-day premium ranging from a low of 75 cents to as high as $5 per share, based on its current price range.
But the deal is big — 63 million shares. However, size doesn’t seem to matter. Consider the Visa (NYSE:V) offering.
On March 18, 2008, Visa priced 406 million shares at $44 each to raise $17.9 billion in the United States’ largest IPO to date.(Industrial and Commercial Bank of China’s October 2006 IPO reportedly raised $18.4 billion, the world’s largest IPO).
Visa closed its opening day at $56.50, UP 38.4 percent from its offering price. The stock closed on Friday, Sept. 18, at $73.79, now UP 67.7 percent from its offering price.
Shanda Games is expected to start trading on Friday, Sept. 25.
Here are two words guaranteed to revive the IPO calendar -– bull market.
From trough to peak, the three major U.S. stock indexes are up sharply from their March 9 lows. The Dow Jones Industrial Average was UP 50 percent from that low at its Friday, Sept. 18, close. The NASDAQ Composite Index was UP 62.1 percent and the S&P 500 was UP 57.9 percent.
Here we are six months later and coming off the Labor Day break (a traditional downtime) and the IPO market is coming back to life. This week’s IPO Calendar looks to price 8 deals to raise $3.5 billion.
The last time we saw a larger preliminary IPO calendar was for the week of Dec. 10, 2007, with 15 deals looking to raise $1.9 billion. By week’s end on Dec. 14, 2007, 11 deals had been priced that raised $1.6 billion, according to the U.S. Securities and Exchange Commission’s files.
In and Out of Rehab
Now back to the present and this week’s expected IPO traffic.
Even though Shanda Games is expected to draw the new-issues spotlight, there could very well be a sleeper among this week’s IPOs.
It is Select Medical Holdings (NYSE: SEM – proposed), a Mechanicsburg, Pennsylvania-based operator of specialty hospitals and outpatient rehabilitation clinics. The company plans to price its IPO of 33.3 million shares at $11 to $13 each to raise $400 million.
Select Medical reportedly has attracted analysts’ attention and they have been speaking favorably about the company. As for the offering, there are the usual unconfirmed rumors that the deal is well oversubscribed. We’ll find out soon enough.
Select Medical is expected to start trading on Friday, Sept. 25.
In closing, Bloomberg.com ran a headline on Sept. 15: “Blackstone Says Markets Open for Private Equity IPOs.”
It quoted Blackstone Group (NYSE: BX) President Hamilton E. James, speaking at the Barclays Capital Global Financial Services Conference (NYSE: BCS) as saying, “The equity markets are wide open for us right now,” and added, “Every private-equity firm is probably experiencing the same thing.”
Note: From January 1970 through Sept. 18, 2009, an “average” IPO month was 26.3 deals. Year-to-date, the 2009 IPO calendar has produced a total of just 23 deals and this week, bankers expect to price eight IPOs.
No, you won’t have to wait until 2010 to see an active IPO market. It’s already here.