Shanda Shares Surged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese online gaming company Shanda Interactive (Nasdaq: SNDA  ) were ringing up a big score today as investors pushed shares up as much as 21% in intraday trading on a potential buyout offer.

So what: Shanda announced today that it had received a "preliminary non-binding proposal letter" from a group interested in taking the company private. That group includes the company's president and CEO, his wife (a board member), and his brother (the COO and a board member). As of Sept. 30, that group already owned 68% of Shanda's outstanding shares.

The offer would have the buyer group paying $41.35 per share, or roughly 24% more than Friday's closing price. The transaction is expected to be financed with debt and the buyer group says it's received a "Highly Confident" letter from JPMorgan Chase regarding the financing.

Now what: The key thing to keep in mind here are the words used in the company's press release such as "preliminary" and "non-binding." The management group proposing the buyout does already own a very considerable chunk of the company, but with the deal still in the early stages, investors may not want to treat this as a sure thing. With that in mind, for investors that are lukewarm on the stock but haven't found a good selling opportunity, this may be it. For investors that are more comfortable with the company, though, as of this writing, there's still nearly a 5% gap between the current price and the offer price, so it could be worth sticking around to realize that.

Want to keep up to date on Shanda Interactive? Add it to your watchlist.

The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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