It’s always exciting when a new stock comes public.  Well, maybe “exciting” is a little too strong a word, lets just say that it’s interesting.

When the mood of the markets turns bearish and the global economy is going over a cliff, initial public offerings dry up quickly.  After all, nobody wants to put a big chunk of their company up for sale when buyers are running for the safety of government bonds.

One of the bigger stories this week for those of us who follow emerging markets stocks is the public offering of Shanda Games (GAME), the new, wholly owned subsidiary of Shanda Interactive (SNDA).

Shanda Games’ parent company is following the lead of Sohu.com (SOHU), a Chinese Internet portal that spun off its game division as Changyou.com (CYOU) earlier this year.

Shanda Games will represent more than 90% of its parent company’s revenue, but Shanda Interactive will still own a major chunk of Shanda Games.

IPOs have a reputation for offering huge gains for those who are granted a chunk of the stock at the open.  The really big money is often made by those who own the stock at the stated IPO price at the market open, then sell later that same day as excited speculators try to buy in.

It’s not unusual for a stock to jump by big multiples in one day.  As an example, VA Software (LNUX) came public at 30 near the tail end of the Internet Bubble.  By the end of the day the stock was up 698%!  (Once the Bubble collapsed LNUX was back below 30 within a year, and today SourceForge (LNUX) can be bought for a buck thirty and change.  How the mighty are fallen.)

Cabot doesn’t recommend playing IPOs, and neither do I.  This is mostly because IPOs are pushed around by forces that have nothing to do with either fundamental or technical factors.  You can make big money if you’re 1) nimble and 2) lucky.  But most people don’t.

I asked my online broker whether it would be possible to buy a small chunk of GAME before its actual IPO and was told that I’d have to be prepared to put up at least $50,000 and have a total market position of at least twice that.

The classic IPO story is of the pros getting in early and then cashing in as the amateurs start throwing their money at the new issue.  Not really my style.

(If you do take a flyer on GAME, let me know how you do.)