Changyou Will Test U.S. Appetite For Chinese-Gaming IPOs

This story was written by Rory Maher.
Sohu.com's gaming subsidiary, Changyou, is scheduled to be split from its parent company when it goes public this week in a bid to raise about $100 million. peHUB reports the IPO is an important litmus test of interest in Chinese gaming companies among U.S. investors. The last two Chinese gaming companies to go public, China Mass Media International Advertising (CMM.P) and China Distance Education Holdings (DL.P), in the U.S., have had lackluster results; both went public almost a year ago, and are now trading below their IPO prices. 

In an announcement a couple of weeks ago, Sohu.com (NSDQ: SOHU) said it would sell about 7.5 million shares of Class A stock in Changyou at an average price of $14 to $16. Class A shares receive one vote per share on corporate matters, while Class B shares, owned entirely by Sohu.com, receive 10 votes. The stock will be listed on Nasdaq.

Other Chinese gaming companies trading on U.S. exchanges have performed well this year, with Giant Interactive Group (NYSE: GA) (GA.N), Shanda Interactive Entertainment (NSDQ: SNDA) (SNDA.O) and NetEase.com (NTES.O) all up between 6 percent and 22 percent. Still, analysts say the prospects for Changyou's listing are dampened by the lack of transparency on financial reporting among Chinese companies and the fact that the company receives the lion's share of its revenue from one game at a time when many are questioning the wisdom of "hit-driven" business models.




By Rory Maher
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