China's largest video game operator, Shanda Games Ltd, priced its U.S. IPO at the top of its indicated range to raise $1 billion in the largest U.S. IPO this year, a source said on Friday.

The company, being spun off from Shanda Interactive Entertainment, priced its American Depositary Shares at $12.50 each, versus a previously announced range of $10.50 to $12.50, a banking source told IFR Asia, a sister publication of Reuters.

The deal was more than 10 times subscribed, and was the largest Nasdaq IPO ever by a Chinese company, the source added.

Earlier this week Shanda Games raised the number of shares it was planning to sell by nearly a third, helping it to raise $1 billion from a previous $725 million target, according to a term sheet obtained by IFR Asia.

The offering is capitalising on China's red-hot online game market, the world's largest and fastest growing, with over 50 million gamers and industry revenues expected to rise 30 to 50 percent this year to 24 billion yuan to 27 billion yuan ($3.52 billion to $3.95 billion), according to the Chinese government.

Shanda Games operates games such as Legend of Mir and South Korean blockbuster Aion in China. It competes with NetEase and Tencent Holdings in China's increasingly competitive gaming landscape.

Goldman Sachs and JP Morgan are underwriting the IPO.

Another Chinese video games maker, Ltd, was spun-off from Chinese Internet portal Inc in April. is the top performing U.S.-listed IPO this year, with shares up 145 percent since their debut. (Reporting by Fiona Lau and Melanie Lee; Editing by Chris Lewis)