Chen: Wall Street don't understand my game analysis grand retreat behind the scenes

Chen has always had a frown on Wall Street, and he used to say bluntly that Wall Street doesn't know how to be grand and he doesn't want to follow behind Wall Street.

October 15, Grand Interactive Entertainment Co., Ltd. (Nasdaq:snda, hereinafter called Shanda Network) announcement, has received the Chairman and chief executive Chen proposed to buy all the non-Chen family held a publicly issued shares of the proposal letter.

Chen will buy up Shanda's online shares at a price of $41.35 a share, a premium of 23.5% over the previous session's closing price, an average premium of 26.6% per cent over the past 30 days, and an average price premium of 60 over the past 25.1% trading days.

In a remark, Shanda's share price jumped from $32.8 trillion to $38.01, or 15.9%, and then more than $40.64 in the price.

Once the takeover plan succeeds, Shanda will end its 2004-year eight-year listing. The market capitalisation of 2.2 billion dollars will also set the record for the largest Chinese internet company to retire.

There is speculation that after the exit, Shanda is about to be transferred to Hong Kong or a-share listing, but also analysis that Chen is only in the FRY stock. Mr, a columnist for the Reuters Web site, argues that Mr Chen is using privatisation proposals to gain attention because of the low share price.

Recently, affected by the trend, and the impact of the fraud storm, the U.S.-listed Chinese concept shares have long been under pressure. Many companies opt to retire in the US and return to Hong Kong or the mainland to go public again. This year, Harbin Tai Fu Electric, Shanghai, Hong Peng Chemical and other listed companies in the United States have opted to return to the city, ready to return to Hong Kong or a-shares return to the market.

In a public setting, gong, managing director of JPMorgan's China district, which is in charge of the Grand retreat, has revealed that it is helping to privatize the grand privatisation deal, and the Chinese concept stocks, which have been shorting overseas, are trying to operate the privatisation retreat.

A familiar chen of the original grand network executives told reporters that after the listing there is a whip in their own, every quarter have performance requirements, Chen overpass already unbearable its suffering. The valuation of the Royal network has long been lower than the same industry, also let him very dissatisfied.

In addition, Shanda game has also been listed, for the listing of Shanda network qualification, Chen has been hearted.

However, the Royal network may not temporarily return to a a-share or the Hong Kong stock Market Road.

A person close to the SFC told reporters that the royal network did not submit a listing to the domestic stock market, while the online game is still not in the industry to be encouraged to list, there are still some of the online game company's listing applications failed to pass the NDRC approval, unable to enter the CSRC approval process.

A number of people close to the Royal network revealed that with the U.S. listing of Chinese enterprises in the story of the withdrawal of the city is very different, Shanda network will not go to the future to seek a listing, retreat will only be a grand group to build a holding platform framework of the first step.

Holding company model

Close to the deal, people told reporters, the grand network from the Nasdaq after the city, the future will gradually become a grand system of holding platform companies, will not be listed in Hong Kong, a-share or other stock market, but to promote the gradual listing of its subsidiaries, its subsidiaries may still be the U.S. stock market as the main

At present, Chen himself and his wife Luo Qianqian, brother Danian holds 68.4% of the shares, in order to acquire the remaining public offering shares, Chen Flyover will spend a total of 736 million U.S. dollars.

For Chen Tianqiao, money is not a problem. It is understood that Chen has borrowed nearly 700 million dollars from the bank to pay for the acquisition costs of bridge loans. In the future after the success of the city, will be a royal network of cash to repay the loan, Shanda network accounts have more than 600 million U.S. dollars in cash.

Familiar with the royal network of people revealed that the 2009 Grand Game (nasdaq:game) listing, just old stocks released more than 800 million U.S. dollars, the acquisition of funds for Chen Flyover is not a burden. The future Grand group can still be a grand game, cool 6 and other listed companies as a financing platform.

Those familiar with the deal believe that the return of the Grand network is actually the beginning of the reconstruction of the capital market map by Chen Tianqiao. Shanda has suffered a bottleneck in the capital markets for two years, and has been hovering at $40 trillion since June 2009, when it stood at the top of $64.55 trillion, and slid to around $30 before Chen's offer.

"Wall Street doesn't understand my game. "Before and after 2006, Chen repeatedly publicly expressed dissatisfaction with Wall Street, when the grand network of digital home Entertainment did not succeed, and free game mode is to be tested, share prices with the proceeds down."

To Chen's disappointment, investors cannot have the strategic vision to see through the gaming industry as much as he does. But for Chen Tianqiao, Wall Street also has its grievances. Family ownership ratio is too high, family management atmosphere is strong.

In addition, after years of expansion, it also makes Shanda's network from the original game company into a business of a wide range of companies, investors difficult to determine their valuation model, the stock market, the common "group discount" (conglomerate discount) phenomenon also affect its valuation.

The "group discount" refers to the often-discounted stock price concession of diversified companies, as most investors have specialized investment areas and valuation models, but the intrinsic valuation model may not be appropriate when the companies present diversify.

In the case of Shanda network, investors familiar with the online gaming market may not be able to understand how high the stock price of Shanda literature should be, and investors who do not understand the cloud industry are not necessarily willing to support the company's development, thus looking at bad stock prices, which has allowed Shanda's valuations to be lower than their peers

In addition to Shanda games, video website Cool 6, Shanda Group currently has network literature platform Shanda Literature, as well as Shanda online, and Hunan Radio and television joint venture of Sheng-video, cloud computing related concepts of a variety of new business. Shanda literature has also submitted a listing application to the SEC.

At present, the main pillar industry of Shanda Network is still a game. 2009, the Grand Network split game business restructured into a grand game and listed on the Nasdaq, Shanda network into a grand game of the parent company, until now, the Grand network of all the profits of 70% of the revenue is still from the grand game.

Two companies appear "a profit, both sides listed" phenomenon, from the grand game of profit must support Shanda games and Shanda Network two listed companies, so that both sides of the investor base erosion.

One fund manager bluntly, the Grand spin-off appeared reluctantly: "You can't peel out two eggs from an eggshell, doomed to have an egg, one is eggshell." ”

September 2009, the Grand game with 12.5 U.S. dollars IPO underwriting Price listed, the first day that fell below the underwriting price, and all the way down to the current 5 U.S. dollars per share price.

"Shanda Network is unable to find its own position in the capital market." "said an investment banker with Chen Byd. The Chinese online gaming company in the United States listed as the precedent of the capital market veteran, now the market positioning has become blurred, the potential for chicken.

The capital operation plan after the Grand Network delisting is the company that will retire from the city as the holding core of the whole Grand Group, plan in the shortest five to 10 years, the company's business one by one listed separately, so that each kind of listing business more specialized, simple, look forward to access to the capital market higher valuation identity, so that each subsidiary listed after the total market value , higher than the current royal network of a company in Nasdaq to obtain the market value of recognition.

This control structure is not novel. Currently, Alibaba as a holding company is not listed, and its subsidiaries one by one listed, that is, the same type of structure. It is understood that the grand current planning, in addition to the grand literature has been submitted to the listing application, the most likely relay listing business, but also includes interactive entertainment platform Shanda Online, as well as the main payment business Sheng.