Candy Crush maker King Digital shares sour in market debut

Wed Mar 26, 2014 6:46pm EDT
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By Malathi Nayak

(Reuters) - Shares in King Digital Entertainment Plc fell as much as 16 percent in their Wednesday debut, underscoring investor concern about the company's reliance on "Candy Crush Saga" and dampening hopes that its coming-out party could revive investor interest in the mobile gaming industry.

Mobile game industry executives had looked to London-based King's IPO, the largest by a gaming company since Zynga Inc went public in 2011, to help sweep aside skepticism over a notoriously fickle, volatile market.

But King's shares fell to a low of $18.90 in afternoon trade from their IPO price of $22.50, which valued the company at about $6 billion.

Since Twitter's market debut in November, King's IPO was the largest U.S. tech IPO and the second-worst performing after textbook rental and academic service company Chegg Inc, which plummeted 23 percent, according to Thomson Reuters data.

The company offers over 180 games but its two-year-old "Candy Crush Saga" game, in which users move candies to line up at least three of the same color, accounted for over three-quarters of King's revenue for the last three months of 2013.

"Once you have a hit, it's hard to make a string of hits. How many bands were the Beatles?" Roger Kay, analyst at research firm Endpoint Technologies Associates said. "Also, there've been a lot of high priced IPOs and mergers and acquisitions (of late) and when valuations get frothy, investors get disappointed when returns don't measure up to expectations."

Candy Crush, a free game, is now a household name and has been downloaded more than 500 million times since its launch on mobile devices. Using the "freemium" model, King makes money by selling players extra lives and other add-ons.

King's dismal debut dragged down other gaming stocks on Wednesday. Zynga shares fell over 4 percent, while smaller player Glu Mobile slipped 4.5 percent.   Continued...

King CEO Riccardo Zacconi smiles during an interview during the IPO of Mobile game maker King Digital Entertainment Plc on the floor of the New York Stock Exchange March 26, 2014. REUTERS/Brendan McDermid