Shanda Games Limited has reached a tentative settlement to resolve stockholder claims that it used misleading projections and proxy statements to complete a take-private deal at an unfair price.
In 2013 and 2014, Shanda shifted toward mobile gaming while developing Mir II Mobile, a mobile version of one of its most valuable franchises. On March 27, 2015 and May 5, 2015, the company used lowered projections and proxy materials to support a $7.10-per-ADS going-private deal. By August and October 2015, Mir II Mobile was already a blockbuster, but the transaction still moved forward without reflecting that success. On November 18, 2015, the merger closed, and the case has now moved to a tentative settlement.
July 29, 2013: Shanda said it was developing a mobile version of Mir II and described mobile games as very important to its strategy.
January 27, 2014: A buyer group submitted a preliminary proposal to take Shanda private.
March 17, 2014: Shanda management provided financial projections to Merrill Lynch and the buyer group.
March 27, 2015: Shanda management provided a new set of projections that showed a sharp drop in the company’s outlook.
April 3, 2015: Shanda announced the proposed merger at $7.10 per ADS.
May 5, 2015: Shanda published its initial proxy supporting the take-private transaction.
August 3, 2015: Shanda launched Mir II Mobile through a partnership with Tencent.
October 13, 2015: Shanda published its final proxy while Mir II Mobile’s early success was already known internally.
November 18, 2015: Shanda shareholders approved the merger and the transaction closed.
Shanda was a major online game company whose business long depended on the Mir franchise. Even as older PC titles remained important, the company was shifting toward mobile games as that market grew rapidly in China.
A major part of that strategy was Mir II Mobile, a mobile version of one of Shanda’s most valuable legacy titles. Shanda promoted the game heavily, described internal testing as strong, and treated it as a major part of its mobile push.
At the same time, Shanda was exploring a take-private transaction. In 2015, management produced projections that sharply lowered the company’s apparent outlook, and those figures were then used in proxy materials and fairness analysis supporting the $7.10-per-ADS deal.
Investors say those materials were misleading. According to the source, the projections were flawed, omitted key information, and treated Mir II Mobile as if it would generate only average results even though the company’s own expectations and later internal results pointed to a much stronger outcome.
The gap became even more important after Mir II Mobile launched in August 2015 and quickly became a major success. Even so, the October 2015 proxy did not update investors to reflect that performance, and the merger still closed in November 2015 at the same price.
Later appraisal proceedings put more pressure on the deal price. According to the source, Shanda’s own expert valued the company at $9.56 per ADS, and Cayman courts later determined fair value above the merger consideration, reinforcing investor claims that the take-private deal undervalued the company. The matter has now moved to a tentative settlement.
What Can Investors Expect Now?
Shanda Games Limited has reached a tentative settlement to resolve stockholder claims that it used misleading projections and proxy statements to complete a take-private deal at an unfair price.
If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section.