Candy Crush Saga Not Sweet Enough for Investors

By

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

TechZone360 Contributor

SHARE THIS ARTICLE
Related Articles

Turning Data into Stories with Natural Language Generation

By: Erik Linask    7/29/2020

Arria's NLG technology takes the burden of storytelling from data analysts by using artificial intelligence to turn data into narrative.

Read More

Benefits of using bitcoins for business

By: Special Guest    7/29/2020

Bitcoin is a digital cryptocurrency that is used by many people to make payments. Indeed, online retail stores are accepting bitcoins as a mode of pay…

Read More

Intelligent Defect Inspection: How Computer Vision Enhances Quality Control

By: Special Guest    7/28/2020

Business competition pressures manufacturers to produce faster, reduce expenses, and increase efficiencies. But all these requirements run into the qu…

Read More

It's Online Collaboration's Time to Shine: Are You Surfing the Wave or Sinking Under It?

By: Special Guest    7/27/2020

What should also be obvious to UCaaS providers is this is a rare opportunity. Unfortunately, too many appear satisfied with letting this wave roll by …

Read More

What Technology Does My New Business Need?

By: Special Guest    7/20/2020

Technology has helped to revolutionise business in several different ways, but with productivity at the heart of every business, technology is needed …

Read More