It has been an interesting and exciting start to the year for the financial markets, especially focusing on the influx of Mergers & Acquisitions and Initial Public Offering (IPO’s) that have been announced. Comcast/Time Warner, Facebook/Whatsapp, Appliances Online, Pets at Home and Poundland are just some of the many companies who have wetted the appetite of investors across the globe. One company which launched on the New York Stock Exchange this week was King, the British game developer behind that very very very addictive game that occupies me on my way to the office every morning, Candy Crush.
Shares in King had been priced before the float at $22.50, right in the middle of analyst predictions of between $21 – $24 per share. The company hoped to raise raise $500 million from the IPO on the NYSE but things didn’t go to plan on Wednesday…
It was a brutal first day for the company as the share price dived 15 percent to $19.08, wiping nearly $1billion of its market valuation.
The cause of the drop was seen to be primarily down to a lack of solid appetite from investors due to sheer volume of IPO’s in the pipeline. Analysts have said that the stock was mispriced because of the companies fundamentals which wern’t as strong as they should be. The company is going to find it hard to replicate the success it has had with Candy Crush – they have over 180 games in their roster and that’s the only one I know they’ve made! If they can show they are not a one hit wonder and create another game which can hit the heights that Candy Crush has been able to attain, which will be incredibly difficult considering the game accounts for almost 80% of the firms bookings, then they will see positive signs and should see improvements to their share prices. CEO Richard Zacconi, whose stake lost $105 million in value during a poor first day of trading, had a more optimistic view on the strategy for the firm. He said on CNBC that their aim was to build the brand of KING to obtain a loyal base of players who play a portfolio of their games.
It will be interesting to see how things develop for KING especially as they entering an industry that is vulnerable to changing trends, with Zynga the makers of the Facebook game ‘Farmville’ being a prime example of a company who have suffered from the volatility. In 2012 they were valued around $12bn but now around $8bn has been wiped off their market capitalisation. Owch! It would burn me if my 12 pounds today was worth 4 pounds in just under 2 years, forget adding the nine zeros on the end!
If will be a long journey for the firm nonetheless and I will definitely be tracking how well they do over the next year or so – I think you should to!
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