Cayman Island Court Decision Sparks Securities Lawsuit Against Shanda Games Limited

New to ClassAction.org? Read our Newswire Disclaimer

Online game developer Shanda Games Limited and its board of directors are facing a proposed class action that takes issue with a merger between Shanda and Capitalhold Limited that was completed in 2015.

At issue in the lawsuit is an allegedly misleading proxy statement the defendants filed to convince shareholders to approve the proposed transaction, which, according to the complaint, contained “unreasonable and unrealistic” financial projections. The suit alleges that the defendants miscategorized many of the games projected to be launched in the years following the merger, producing faulty calculations of how much revenue they would earn and thereby decreasing the company’s equity value. As a result of these alleged miscalculations and several other “material errors” in the proxy statement, stockholders were under-compensated for their shares of Shanda stocks, the case argues.

The plaintiff claims these issues came to light after the company filed a petition in the Grand Court of the Cayman Islands, where the company is incorporated, “seeking the court’s determination of the fair value of Shanda’s shares with respect to three dissenting shareholders.” On April 25, 2017, the court reportedly concluded that the company’s stock was worth 135 percent more than shareholders were awarded in the transaction – a price later recalculated to represent an 81 percent premium over the original sale price.

The plaintiff argues that the defendants’ allegedly misleading statements caused stockholders to sell their shares of Shanda securities at deflated prices and suffer economic losses. The suit seeks to cover anyone “who either held the publicly traded shares of Shanda on November 18, 2015 or sold such shares during the period between May 5, 2015 and November 18, 2015.”