Shanda Buys 19.5 Percent of Sina's Outstanding
Shares
Shanda Interactive Entertainment (Nasdaq:SNDA) has bought
19.5% of Sina.com's (Nasdaq: SINA) outstanding shares,
or 9.8 million shares. Sina currently has 50,477,694
ordinary shares outstanding as of October 30, 2004. This
was revealed in a SC13D filing made with the Securities
and Exchange Commission today.
Sina shares took a fall when the company announced its
earnings report ten days ago, when the company announced
that the Chinese government had banned a significant
part of its SMS (short message service) revenue when
it ruled that the use of horoscopes and fortune-telling
messages were not legal. Sina.com depended on horoscopes
and fortune-telling for a significant part of its revenue,
and that earnings would take a significant for the first
quarter.
Sina.com is
China's largest online portal, and Shanda is China's
largest online
gaming content provider. Sina.com performed best
in 2002 and 2003, rising from US$1 to more than US$40,
and Shanda has performed spectacularly in 2004, debuting
at $15 in May and rising to more than US$40. Today, it
closed at $30.01. It was the best performer on Nasdaq
in 2004.
Sina.com had an unpleasant surprise when its earnings
slip caught Wall St. analysts largely unaware. Since
the Feb. 8 announcement, the company has been faced with
lawsuits by seven US law firms, claiming to represent
a class action lawsuit against the management of Sina.com.
The lawsuits contend that Sina.com's senior management
conspired to hide the poor results from individuals who
bought Sina.com share in late 2004 and early 2005.
For Shanda, this represents an opportunity to diversify
from the intensely competitive online gaming market,
and acquire a portal cheaply. The 19.5% stake means that
Shanda should have at least one board seat, and is in
a position to make changes at the top.
Shanda is at an advantage because it is a wholly-owned
Chinese company, which means that it is given preferred
treatment by the Chinese government in competition with
non-Chinese companies. The Chinese government is encouraging
Chinese companies to compete
internationally.
While Sina.com positions itself as a Chinese company,
its board and senior and middle management are largely
overseas Chinese from the US and Taiwan.
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