Shanda Asian Dream In The West

New York Times had a nice article about IPOs in the States. Shanda Interactive Entertainment claims to be the biggest online-based game company in China (it pretty much is, so it is not only a claim). It was listed in May 2004 and the stock price has risen 268% from then. Very impressive! In October, they loaned 275 million dollars for ten years without interest (convertible bond offering). Evidently this is a company that has valuation and money. What are they doing with all this money?

They bought a controlling share of Actoz
They acquired QiDian
They bought rest of the shares of Digital-Red
They acquired BianFeng
They bought a minority share of Hao Fang or Holdfast

Hoarding up talent, eh. For me this looks like selling their simple idea of online gaming in Chinese markets for big money and then using that money to buy out competition and cementing that simple idea. Almost like mini Microsoft, but not quite like it... Let's see, it is market leader and has great management. Also, according to the Chinatechnews.com there are even some complaints coming from the street level, internet cafes do not appreciate Shanda's monopolistic business practices. Obviously all this works wonders, just check the stock price.

What if people start to question this simplicity? What if internet cafes integrate into even bigger chains and get a real market voice? What if competition is going to put out more interesting games? Valuation might come down, but luckily they still have this steady operator business and in-bought content. They will survive and go on, no matter the market conditions. I must congratulate the managers of Shanda. Great job guys.

If you are planning to invest into Asian online-game company, you better give some serious thought for Shanda. Hoovers is a good place to get some more information.