Shanda, which has significant leadership in the online game market, is trying to extend its presence from online games to an entertainment empire on the Internet, mobile phones and TVs.

Sina is the second most influential news and entertainment site in China after the national broadcaster CCTV and it's holdings were highly distributed. Taking a minority stake in Sina allowed Shanda to control a valuable content asset at a low cost.

However, Sina's board thought the move was a stealth attack to take over and launched a poison pill, which allowed other investors to purchase Sina's shares at half price if Shanda boosted the holdings to 20 per cent.

Meanwhile, Shanda began suffering heavy financial blows due to regulatory control of Internet protocol TV, slow progress in new services, the decline of its flagship games, and fierce competition in the market. These factors caused Shanda's revenues to fall year-on-year for four consecutive quarters.

Now, returning to growth is a top priority for the Shanghai firm, especially since it's expected to announce third quarter financial results on Thursday in the United States.

In October 2004, Shanda issued US$275 million convertible notes at an estimated price of US$39.70 per American depository share, which is redeemable from October 15, 2007.

The urgency to improve its financial performance and the pressure of the possible need to redeem its US$275 million convertible notes make it necessary for Shanda to get some cash.

At the end of June, the online game operator had cash and the equivalent of just US$130 million, said Lu.

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