It seems I may have been wrong when I questioned the sincerity of Chen Tianqiao after he announced a potential bid to privatize his company, Shanda Interactive (Nasdaq: SNDA), as Chen has now gone ahead and actually launched the buyout. (company announcement; Chinese article) Chen put forth the plan last month to buy back his company’s shares for $41.35 each (previous post), and is now keeping his word with this latest offer. Interestingly, Shanda’s shares rose to only $40.28 in Tuesday trading after the announcement, representing a 2.6 percent discount to the offer price, indicating investors still aren’t totally convinced that this privatization will be completed. In fact, Chen has no real intention of keeping his company private for long, as he wants to list it on one of China’s domestic stock exchanges, according to Chinese media reports. I have to admit that this kind of a strategy does seem to make sense, as Shanda is quite well known in China, where it is considered a leader in online games. Furthermore, Shanda’s online game unit, Shanda Games (Nasdaq: GAME) is still listed on the Nasdaq, and the company is also planning a US listing for its online literature unit, Cloudary. (previous post) The only problem with his latest plan is that Chen may have to wait a long time to list his company at home, as China has shown a strong bias against privately-funded firms in choosing IPO candidates for its two main boards in Shanghai and Shenzhen, preferring to list companies with strong government ties, mostly former state-run enterprises. Chen could opt for the 2-year-old Nasdaq-style ChiNext board in Shenzhen targeting smaller, high-growth companies. But that board has turned out to be hugely speculative, with firms that trade there subject to huge swings in their share prices. All that said, if Chen really completes this privatization, it could be a while before we see Shanda Interactive shares publicly traded again. Perhaps in the meantime, Chen could focus on trying to better run his various businesses, including struggling Ku6 Media (Nasdaq: KUTV), and temporarily put aside the deal making that he seems to love so much.
Bottom line: Shanda Interactive appears intent to go through with a privatization bid, but will face a long wait before it can re-list in its home China market.
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