WASHINGTON, DC (March 27, 2018) — U.S. Market Advisors Law Group PLLC announces that a securities class action has been filed against Shanda Games Limited (“Shanda” or the “Company”) (NASDAQ:GAME). The class action is on behalf of investors who held shares of Shanda on November 18, 2015 OR sold such shares between May 5, 2015 and November 18, 2015.
Shanda is engaged in the development, operation, and publishing of online games, including both multi-player online role-playing games and mobile games, as well as related businesses, principally in China and also in various other countries.
On April 3, 2015, Shanda announced that it had entered into an Agreement and Plan of Merger, by and among the Company, Capitalhold, and Capitalcorp Limited, a corporation and wholly owned subsidiary of Capitalhold (“Capitalcorp”).
Pursuant to the terms of the Merger Agreement, Capitalhold acquired Shanda through the merger of Capitalcorp with and into Shanda, with Shanda surviving as a wholly owned subsidiary of Capitalhold. Both Capitalhold and Capitalcorp were formed under the laws of the Cayman Islands solely for purposes of the Merger and on the date it became effective were beneficially owned by a consortium of other companies (the “Buyer Group”), including Ningxia Yilida Capital Investment Limited Partnership, a limited partnership formed under the laws of China and an affiliate of Zhang.
As of the date the Merger was announced, the Buyer’s Group owned approximately 76.1% of the Company’s issued and outstanding shares of stock and 90.9% of the total number of votes represented by the Company’s issued and outstanding shares.
Pursuant to the terms of the Merger Agreement, Shanda stockholders received $3.55 per Class A ordinary shares and $7.10 per American Depositary Shares (“ADS”) in cash in exchange for, respectively, each share of ordinary Shanda common stock and of Shanda ADSs that they owned.
Allegations Against Shanda
The complaint alleges that Shanda issued materially false and misleading statements in Proxy Statements and other materials related to the proposed merger of Shanda with Capitalhold, thus inducing shareholders to sell their shares of Shanda common stock at artificially deflated prices or to refrain from exercising their appraisal rights.
Between May 5, 2015 and October 13, 2015, in order to convince Shanda stockholders to vote in favor of the Merger, Defendants authorized the filing of a materially false and misleading Proxy Statement on a Schedule with the SEC, in violation of Sections 10(b), 14(a) and 20(a) of the Exchange Act.
On November 18, 2015, an extraordinary general meeting of shareholders approved the merger, with 99.3% voting of the outstanding shares voted in favor of the transaction.
The false and misleading nature of the Proxy Statement was revealed in certain ancillary proceedings. On February 4, 2016, Shanda filed a petition pursuant to Sec. 238 of the Cayman Islands corporate business statute dealing with the right to seek appraisal, seeking the court’s determination of the fair value of Shanda’s shares with respect to three dissenting shareholders.
On April 25, 2017, the Grand Court of the Cayman Islands issued its decision in the appraisal action, awarding the dissenters $16.68 per ADS (amounting to $8.34 per share), an extraordinary 135% increase over the deal price.
Among other reasons for the Cayman court’s holding was its finding that the forecasts of Shanda’s future performance that Defendants had included in the Proxy Statement contained several material errors for which it further found no reasonable basis. Indeed, the court expressly quoted statements in the Proxy Statement purporting to assure investors and shareholders that the “forecasts were reasonably prepared on bases reflecting the best available estimates and good faith judgments of the management of the Company as to the future financial performance of the Company.” Given its separate judgements as the unreasonableness of several material assumptions, the court implicitly found that these representations were false and misleading.
Accordingly, the Merger Consideration was inadequate, and the process by which Defendants consummated the Merger transaction was fundamentally unfair to Plaintiff and the other Shanda common stockholders, directly by reason of the materially false and misleading statements contained in the Proxy Statement, in violation of Sections 10(b), 14(a) and 20(a) of the Exchange Act.
As a direct result of these materially false and misleading statements, a class of shareholders were wrongfully induced to (a) sell their shares of Shanda common stock at artificially deflated prices during the period from May 5, 2015 to November 18, 2015 (the “Class Period”), or (b) refrain from exercising their appraisal rights under Cayman law as of November 18, 2015, including the right of owners of Shanda ADSs to transfer their ownership of the ADS into shares of ordinary common shares of Shanda and then exercise such appraisal rights.
Pending Lead Plaintiff Deadline Approaching
Investors with losses have until May 21, 2018 to ask the Court to be appointed as Lead Plaintiff for the class. The Lead Plaintiff is a representative for absent members of the class. Contact USMA Law Group to discuss this action at no obligation or cost.
Investors do not need to seek appointment as Lead Plaintiff to share in any class recovery in this action. If you are a class member and there is a recovery for the class, you can share in that recovery as an absent class member. You may retain counsel of your choice to represent you in this action.
About USMA Law Group
U.S. Market Advisors Law Group PLLC is a national law firm based in Washington, D.C. The firm represents investors worldwide in U.S. securities class action lawsuits.
David P. Abel