Candy Crush Saga Not Sweet Enough for Investors

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Candy Crush Saga is a wildly popular game for King Digital Entertainment, but the same cannot be said about the social gaming company’s stock which had a disappointing IPO this week.

King lost 15.6 percent going from $22.50 to close at $19 on its opening day. News reports said that “made it the worst trading debut this year, according to data from Renaissance Capital.” Yahoo Finance reported the stock was at $18.49 as of 4:03 pm (EDT) Thursday.

On the IPO day, Wednesday, many investors simply dropped the stock, Market Watch reported, with Scott Sweet, senior managing partner at IPO Boutique, saying “traders immediately pulled the trigger… It’s getting pounded.”

For Sweet, the King IPO is similar to the one of Zynga in 2011. Zynga is down about 54 percent from the price found with its initial public offering, news reports said.

In addition, there was some speculation that King really only has the one popular game, and there is no depth to the company. The New York Times reported King gets 78 percent of gross bookings from Candy Crush Saga.

Compare King’s experience to Renaissance Capital reporting that the average IPO on the initial trading day saw 22 percent for the start of 2014, “far above the 13 percent to 15 percent norm.”

 “Seeing the strong first-day pop, many of the pros put in for this IPO, but the interest in buying in post-IPO trading was not there,” Renaissance Capital added in the statement. “King has an amazing business but it cannot be extrapolated from current levels and the IPO price needed a greater discount.”

Some 93 million people play Candy Crush more than one billion times per day, according to news reports. But there may also be some concern about the game’s future. Candy Crush’s gross bookings, what The New York Times explains as the amount “players pay for items in the game,” dropped during Q4 of 2014.

In response to the disappointing IPO, Riccardo Zacconi, chief of King Digital Entertainment, told the Times on Wednesday, “We’re not focused on the short term. If you want to achieve shareholder value, you have to look at the long term.”

In reviewing data for early this week, the Times reported that it was a “stormy” week, overall “for young technology companies.” Twitter was down 13 percent through Wednesday. FireEye was down 11 percent. Netflix was down 8 percent.

It was also reported that King got a valuation of more than $7 billion as of Tuesday evening.

But it was also the only technology or Internet IPO to finish the first day of trading “down this year,” The Wall Street Journal reported.

"Investors are clearly finding the price tag a little high for a company that relies on most of its revenue from one albeit popular game," Jasper Lawler, an analyst at CMC Markets, told The Guardian.


Edited by Rory J. Thompson
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