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[Guevara]

King Digital, publisher of the popular mobile game Candy Crush Saga, began trading as a public company today on the NYSE not with a pop but with a drop. The stock, trading as KING, commenced trading at only $20.50, down nearly 9% on the $22.50 per share it announced on Tuesday.

It’s a sign that after healthy debuts for the likes of Twitter and a number of other tech companies, it’s clear that investors are not taking all tech IPOs with open arms.

Why does it matter?

The King.com IPO is something of a bellwether for a couple of reasons.

First, it’s the first big public listing for the gaming industry since Zynga in 2011. After a flurry of activity and a small pop on opening day, Zynga’s shares declined 75% in the year after it listed. Popping at $11 per share on its debut day in 2011, Zynga’s shares are currently bobbing along at just under $5.

That’s had a cooling effect on other companies in the space who might have otherwise entertained similar routes. Supercell, one of the standouts in mobile gaming in the last year, notably took a very large investment from Softbank last year, 51% at a $1.53 billion price, as an alternative way of raising capital and giving its shareholders and employees liquidity.

Second, it’s a measure of how well a mobile-first and free-to-play casual gaming company can fare on the markets today. Initially, analysts pointed to Zynga’s lack of a strong mobile gaming portfolio — and too strong a reliance on the Facebook platform — as two reasons for why its stock and business have not fared so well. In that regard, King.com’s formula of taking popular casual games and retooling them specifically for mobile should have been an antidote to these problems.

However, as Alex has described, there has been another challenge facing King.com: it’s effectively only proven to be a one-hit wonder.

King.com made the majority (78%) of its $1.88 billion in revenue in 2013 from Candy Crush Saga, which currently clocks up 97 million daily active users and over 1 billion daily game plays. But with no other games in its current pipeline that are nearly as strong as this, it’s a sign from the market that it is skeptical of whether King.com will manage to move beyond that.

http://techcrunch.com/2014/03/26/king-ipo-2/

 

[flyinpiranha]

People learned.

 

[OneEightZero]

People saving money for IAP.

 

[Riki]

A company makes a single mildly successful game and they suddenly think they can run the industry. Will they ever learn?

 

[HoosTrax]

Is that a Photoshop? Or did they really cover the NYSE with a giant Candy Crush banner?

 

[Guevara]

Is that a Photoshop? Or did they really cover the NYSE with a giant Candy Crush banner?

That's real, and what's more inside:

 

[SovanJedi]

Jesus, you think people would learn about flash-in-the-pan game companies after Zynga's multiple downsizes and layoffs. Oh well.

 

[explodet]

All of the traders are too busy playing Flappy Birds.

 

[Jigorath]

Investors are getting smarter. This whole company was built on a fad, what's going to happen when Candy Crush fades from public memory and everyone moves on to the next big thing?

 

[RE_Player]

Jesus, you think people would learn about flash-in-the-pan game companies after Zynga's multiple downsizes and layoffs. Oh well.

This so much! At least it will be interesting to watch.

 

[ekim]

My mind is blowing every time I think about the fact that they got that rich with a game as simple as Candy Crush Saga. Hell I would be able to make this game...

 

[HoosTrax]

That's real, and what's more inside:

Yikes...

On a different note, I'm kind of surprised that we haven't seen a partnership yet with Willy Wonka for a tie-in game for the Runts candy brand. I can't see that game without thinking about Runts.

 

[brianmcdoogle]

Don't most tech and recent IPOs usually go poorly at the start? Maybe it is my selective memory, but I can't think of many high profile IPOs doing great at the start (which is why as a general rule you should never invest in an IPO at launch).

 

[hawk2025]

Is that a Photoshop? Or did they really cover the NYSE with a giant Candy Crush banner?

All the GDC lanyards I saw also featured some awful "farm" game I had never heard of.

 

[Megatron]

A company makes a single mildly successful game and they suddenly think they can run the industry. Will they ever learn?

to be fair, CCS is a lot more than 'mildly successful.

 

[Guevara]

Don't most tech and recent IPOs usually go poorly at the start? Maybe it is my selective memory, but I can't think of many high profile IPOs doing great at the start (which is why as a general rule you should never invest in an IPO at launch).

Most tech IPOs seem to have a day-one "pop"; they close higher at the end of the day.

Notable exceptions: Facebook and Zynga (for different reasons)

 

[Sir Blaming]

People got smarter, and then I realize that King managed to trademark candy.
yes, I am still pissed about that

 

[zigg]

Second, it’s a measure of how well a mobile-first and free-to-play casual gaming company can are on the markets today.

What does this sentence even mean. It's breaking my brain.

 

[Arkage]

This company will be in the same exact position as zynga. I wouldn't invest till there's an obvious rock bottom.

 

[Mr Swine]

So which developer is going to take over Kings place when it crashes and burns?

 

[Pureauthor]

What does this sentence even mean. It's breaking my brain.

It's missing an 'f'. The word is 'fare.'

 

[Guevara]

It's missing an 'f'. The word is 'fare.'

Ha thanks. I somehow glossed right over that sentence and it made sense to me.

 

[Neuromancer]

I'm finding these hilarious

 

[jcm]

A $7B valuation for King is considered "not great"?

A company makes a single mildly successful game and they suddenly think they can run the industry. Will they ever learn?

Mildly successful? They had revenue of $1.9 billion and a profit of about $568 million in 2013.

 

[Galactic Barret]

Would it be safe to say that the Angry Birds bubble has burst?

Because I see the same happening here. As I'm actively writing this post, I get the craziest feeling that this space is where the majority of the Wii market went: consumers mostly interested in low-commitment interactive entertainment. They share no loyalty to King, and once this year's fad comes along, CCS will be easily replaced, like AB, TR, SS, etc before it.

 

[Green Wiggly]

So which developer is going to take over Kings place when it crashes and burns?

I'm currently working on Meat Squish Story.

 

[DomsPlaying]

Is that a Photoshop? Or did they really cover the NYSE with a giant Candy Crush banner?

Most new IPOs will hang a giant banner on the front of the NYSE building with their brand and ticker on it during their first day of trading. Also might have exhibits or other gimmicks like these mascots walking around getting in the way of people commuting to work ha. I walk by the building every day to my office, pretty common nowadays.

 

[1st Course]

$7B is actually way much better than most analysts predicted.

 

[BouncyFrag]

We needed some folks in period Viking garb to crash the party. At the very least they could have just stood there with arms crossed whilst sternly shaking their heads.

 

[slit]

I don't understand why this game rocketed into the stratosphere. It's essentially a Bejeweled clone. People really care that much about a candy theme?

 

[BulletTheory]

97 million daily active users. That is CRAZY! 1.5% of the worlds population play Candy Crush every day.

 

[Sho Nuff]

There's nothing funnier than dudes in suits standing next to giant mascot characters

 

[jet1911]

I'm finding these hilarious

N'woo?

 

[SneakySneaks]

A $7B valuation for King is considered "not great"?



Mildly successful? They had revenue of $1.9 billion and a profit of about $568 million in 2013.

Usually a company is only worth about five to ten times their average profit. Ten being a diverse company with great hop for the future. At max King should be valued at five billion, and that doesn't account for the likely drop off when the next fad game comes around.

 

[Kerda]

It's fascinating to me that this is even a thing. People are taking what are essentially glorified Flash games, where the "product" being sold are in-game currencies that only, like, 1% of players are even spending money on, and saying "Yes, this is a sustainable business! Let's go public!".

What is our economy that this can even happen? Candy Crush is the digital equivalent of a crooked carnival game, or one of those claw machines you see in grocery stores. The difference of course is that carnival games have been around and making money for over a century, where as Candy Crush probably won't even be a thing 18 months from now.

In summation, our entire economy and monetary system is a sham, since the notion of "value" has become so utterly detached from anything approaching logic or reality.

 

[ZackieChan]

Don't most tech and recent IPOs usually go poorly at the start? Maybe it is my selective memory, but I can't think of many high profile IPOs doing great at the start (which is why as a general rule you should never invest in an IPO at launch).

Pretty much. Though it won't stop people from projecting their hate of Candy Crush onto the situation and blaming that

 

[adj_noun]

I wonder what it was like to play an anthropomorphic strawberry inside the NYSE.

What do you put on your resume?

* Assisted in major brand awareness effort in globally significant financial market.

 

[HoosTrax]

I'm currently working on Meat Squish Story.

Are you going to sue Edmund McMillen once you trademark your game's name?

Most new IPOs will hang a giant banner on the front of the NYSE building with their brand and ticker on it during their first day of trading. Also might have exhibits or other gimmicks like these mascots walking around getting in the way of people commuting to work ha. I walk by the building every day to my office, pretty common nowadays.

Makes sense. It's just that the photo looked a little odd, with everything else in it looking all washed out and gray and drab, then the bright orange banners making an odd contrast. I guess its just federalist (or w/e it's called) architecture of that neighborhood.

 

[jcm]

Usually a company is only worth about five to ten times their average profit. Ten being a diverse company with great hop for the future. At max King should be valued at five billion, and that doesn't account for the likely drop off when the next fad game comes around.

Yeah, that's not right at all. 5-10 is a low P/E.

 

[beril]

I can't help but seeing this as little better than a scam. The bosses at king are smart people and they know it's extremely unlikely they'll ever be able to recreate the success of candy crush, and I believe that has already starter to peak. As a privately held company that would be perfectly fine; they've made enough profits to make the owners rich and keep the company running for a long time even if they'll never make anywhere near the same profits again, but instead they're cashing out at the peak and the people investing at this point will be screwed.

 

[Tiktaalik]

This stock is going to drop like a stone. Investors are catching on to the fact that gaming is a hit driven, non repeatable business. It's a difficult investment.

 

[Green Wiggly]

Are you going to sue Edmund McMillen once you trademark your game's name?

Of course. I'm also suing you, Oscar Meyer, and Lady Gaga.

 

[The Horror the horror]

Anyone thinking about short selling this?

 

[Mask]

"Whats that Sir? You'd like to invest? Of course, just go talk to the giant Strawberry over there."

 

[Interfectum]

Those pictures are embarrassing.

 

[Maybesew]

So the IPO valued the company today at 7 billion dollars, and 78% of revenue comes from candy crush, valuing that single game at 5.4 billion dollars....

Anyone thinking about short selling this?

It may be difficult to short because of the low float. Without a lot of shares on the market, it's extremely expensive to cover the margins of shorting it. This was the same tactic used by Groupon when they went public.

 

[TheFLYINGManga_Ka]

I still think PopCap should get some royalty right?

 

[bigmit3737]

I still expect it to go up, $30 a share.

 

[Guevara]

So the IPO valued the company today at 7 billion dollars, and 78% of revenue comes from candy crush, valuing that single game at 5.4 billion dollars....

Wow when you think of it like that.

 

[beril]

so it closed at -15.56% today. shocking