Breaking Down The Candy Crush IPO

King Digital, the brains behind the addictive game Candy Crush, went public Wednesday. Can they avoid the mistakes of prior IPOs by game companies?
Posted at 1:47 PM, Mar 26, 2014

Candy Crush parent King Digital has a highly addictive game, but will Wall Street investors find its market debut equally enticing?

The game maker is next in line to appear on the trading floor under the ticker symbol KING. Its highly anticipated IPO started trading Wednesday at $22.50.  By early morning trading, the price had fallen about 10 percent, fluctuating around $20 a share.

Kingannounced in a statement: 22 million shares are up for grabs during its initial public offering and each is priced at the exact midpoint between its speculated range of $21 and $24 a share.

That per-share price means King raised around $500 million in its IPO, which values the 10-year-old company at more than $7 billion.


“It's a crazy idea. A company that makes a game that moves candy around could be worth $7 billion. some investors may decide we are not buying shares of King, while others might be more bullish about this.” (Via WOFL)

What’s crazy to some investors is King’s lopsided revenue stream.  More than 70 percent of King’s bottom line comes from one game: Candy Crush, which has shot their earnings up 7000 percent since last year, according to The New York Times.  

Bloomberg emphasizes investors know there is a risk associated with keeping one-hit wonder games viable for the long run.  

As covered byCNN, Zynga has already put “Writing on the Wall Street” after a shaky IPO launch in 2011.  It has struggled to stay relevant in the game marketplace, especially after its hit game Farmville was steam-rolled by Candy Crush’s success.  On Tuesday, Zynga closed below $5, less than half its IPO price.

However, one analyst told Bloomberg why King Digital could break the mold of poor-performing game company IPOs.

“Underneath that is a very well run company that has been generating very good revenues… which is very very different from Zynga. They have 1/3 of Zynga's asset size, yet they have double the revenue.” (Via Bloomberg)

But for now, Candy Crush continues to drain devices around the world.  Forbes reports in February alone, King’s “match three” game “garnered 97 million daily active users and over 1 billion daily game-plays.”