Shanda Games Shares Plunged: 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 specialist Shanda Games (NAS: GAME) fell as much as 14% overnight on fairly heavy volume.

So what: Shanda Games jumped sky-high at the end of November as the company announced an insanely generous $1.02 special dividend per depositary share. Today, the stock gives back the dividend-fueled price boost as the ex-dividend date rolls by -- buying shares today won't land you a 20% yield anymore.

Now what: The company ordered up this special dividend because its cash balance outstripped short-term capital needs. I have to wonder if Shanda couldn't have found a better use of $285 million, such as buying smaller rival The9 (NAS: NCTY) or pumping up game development efforts. The spun-out gaming arm of media empire Shanda Interactive Entertainment (NAS: SNDA) has seen share prices fall 33% over the last year; we're not exactly talking about a machine firing on all cylinders here.

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At the time thisarticle was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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