King Digital Entertainment IPO Disappoints
While its founders may have hoped to join the ranks of tech billionaires, King Digital Entertainment went public yesterday with disappointing results. With pre-IPO pricing of $22.50 per share, putting the company’s value at $7.09 billion, King’s shares opened at $20.50 and dropped to a low of $18.90 in afternoon trade. Analysts have noted that tech investors may be wary following Zynga’s disappointing performance, with the company having failed to post an annual profit since launching its IPO in 2011. Also, relying on a fickle public to continue supporting its flagship game ‘Candy Crush’ has likely made investors uncomfortable. Although King offers more than 180 games, it’s been reported that Candy Crush accounts for up to 78 percent of the company’s sales, with 97 million daily active users generating revenue.
King Digital Entertainment’s CEO Riccardo Zacconi has tried to allay those fears, saying that there is revenue potential in growing the company’s other games. While acknowledging that Candy Crush has been “an incredible success”, Zacconi noted in an interview from the NYSE that King’s target is to “build a portfolio of high-quality games”. Having been profitable since 2005, it may be that the digital gaming company will recover from its rocky start. Analysts note that its “Farm Heroes Saga” game has been gaining momentum since its launch in January. Whether investors will start supporting the company remains to be seen, but for now its executives will not be joining the billionaire’s list.