Goldman Hoses Clients In Busted Shanda Games IPO

hosed tbi

Ah, the plight of a middleman…

Goldman took every nickel off the table for its corporate client, Shanda Games (GAME), and thus socked it to its investor clients by overpricing Wall Street’s latest hot IPO.

Don’t scream too loudly, though–or you won’t get shares of the next one.

Bloomberg: Shanda Games Ltd. tumbled in its first day of trading in New York after the unit of China’s biggest online games provider sold shares at the top end of estimates in the largest U.S. initial share sale this year.

Shanda Games, which was spun off by Shanda Interactive Entertainment Ltd., dropped 7.2 per cent to $11.60 at 1:33 p.m. in Nasdaq Stock Market trading. Shanda Interactive slid 10 per cent to $51.

“People believe Shanda Games has been priced at market,” said Tian Hou, a New York-based analyst with Pali Capital Inc. “What’s the room to go up if it’s already priced at market?”

The Shanda deal also illustrates why Goldman makes the big bucks–It manufactured $3 billion of value out of thin air:

Citigroup Inc. recommended selling shares of Shanda Interactive, saying valuations are “inflated.”

“Shanda Interactive plus Shanda Games is now valued at $7.5 billion from $3.7 billion before, without any change to underlying revenue and earnings potential,” Citigroup analysts Alicia Yap and Jason Brueschke wrote in a report. “We find it hard to justify.”

Shanda Interactive retains 71 per cent of Shanda Game’s stock and 96 per cent of voting control.

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