A crush it is not.
Wall Street is giving King Digital Entertainment, the company behind the popular mobile game Candy Crush Saga, the cold shoulder in its public trading debut.
King’s stock was priced at US$22.50 on Tuesday, valuing the company at US$7.1 billion, but it opened on Wednesday at US$20.50, down almost 9 percent. Its shares lost more ground by the day’s close, falling more than 15 percent to US$19.01.
King Digital had US$1.88 billion in revenue last year. That is more than 10 times its 2012 revenue of US$164.4 million.
However, some analysts have questioned whether King would be able to repeat the success of Candy Crush, which has been far more successful than any of its other games. Its other top games include Pet Rescue Saga and Farm Heroes Saga.
“It’s a one-hit-wonder,” said Francis Gaskins, director of research for Equities.com and president of IPOdesktop.com. “The history of game companies is that none of them can prove that they can consistently introduce new products to grow revenue. They say they can, but they can’t.”
Candy Crush has been immensely popular, but Gaskins said it is a maturing product that consumers are growing tired of. He pointed to a slowdown in revenue and profit between its last two quarters as an indicator. He thinks investors may be anticipating another dip in revenue for the current quarter ending on Monday.
King’s debut has drawn comparisons to another game maker, Zynga Inc.
Zynga had a much-ballyhooed initial public offering (IPO) in late 2011, but the company faltered after having trouble transitioning into a mobile company from one whose games are played mostly on a desktop computer.
However, King cofounder and CEO Ricardo Zacconi told CNBC on Wednesday morning that the company is “not just a one-hit wonder,” adding that it has three games in the top 10 on Facebook.
King may also be faring better than other high-profile IPOs when it comes to its financial health. Rapid Ratings, which analyzes companies’ financial efficiency, gave the Ireland-based company a score of 86 on a scale of 0 to 100. In comparison, the firm rated Twitter Inc 16 at the time of its IPO in November. Facebook Inc, meanwhile, scored 73 when it went public in 2012 and Google Inc 80 at the time of its 2004 IPO.
Rapid says 90 percent of companies with a rating below 40 defaulted on their debt at some point.
King had 665 employees at the end of last year. Zynga, meanwhile, is cutting jobs, but still has about 2,100 employees, down from a peak of 3,300 in 2012, at the tail end of the FarmVille craze.