Shanda Games: A Deceptive Gain

Shanda Games, (NASDAQ: GAME), the Chinese online gaming company was among the biggest gainers yesterday with the stock seeing an upside of 10.75%. However this isn’t a gain in the true sense if you held the stocks as of the close of July 28th, the day before Shanda games announced its acquisition of affiliates from its parent company for $811.5 MM. An investigation by law firm Gilman Law valued the acquisitions at $556M, with Shanda Games essentially overpaying by $255MM, which assumes significantly large proportions when you consider the total market cap of Shanda games at $1296MM as on July 28th close. The following fall in price can be attributed to the company overpaying and the market overreacting with the price hitting a low of $3.8 on August 9th, erasing off $508MM from the total market cap compared to July 28th close. Therefore it is in line with expectations for the price to correct itself and move up to make up for the initial overreaction in the market. The price will continue to rise if no new revelations come out with regard to the acquisition deals.

To see Shanda Games’s latest stock price movement, click here (NASDAQ: GAME)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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