Shanda Interactive Entertainment selling 4.57M shares

Shanda Interactive Entertainment Ltd. (Nasdaq: SNDA) shares are down after it announced after the bell that its controlling shareholder, Skyline Media Limited, is selling 4.57 million shares of Shanda. Skyline will still control more than 50% of the online-gaming company’s shares after finishing the sale.

Shortly after the start of trading, investment bank Piper Jaffray increased its target price of Shanda to $43 from $41, following its recent trip to China where analysts met with Shanda’s management. In a research note, Piper Jaffray said Shanda is tracking ahead of expectations for the current quarter and year-out estimates are overly conservative. The note also said Shanda is well-positioned to capture additional market share in the rapidly growing Chinese online gaming sector due to improving portfolio, strong execution and increased user base

Also today, local Chinese media is reporting that Shanda is in the process of developing an in-game advertising business, according to China-based investment firm Pearl Research. Only 6% of Shanda’s users are paying for virtual items, Pearl Research reported, and in-game advertising will allow Shanda to generate sales from non-paying customers.

In afternoon trading, SNDA shares are down 6.71%, or $2.40, at $33.36. Over the last 52 weeks, shares have ranged from $13.63 to $36.37.

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