King will hope to benefit from its focus on the estimated $17
billion market for mobile game apps and avoid the fate of rivals
such as Zynga Inc, which has struggled to make its games as popular
on phones as they are online.
"Candy Crush," which involves moving candies to make a line of three
in the same color, was the most downloaded free app and top
revenue-grossing app in 2013. The game accounts for nearly
three-quarters of King's revenue.
Dublin-based King said on Wednesday it expects to price its IPO at
$21-$24 per share, valuing it at up to $7.6 billion — slightly
higher than Hasbro Inc, the 90-year old maker of Monopoly, Scrabble
"I think the bankers have priced the deal in a way so that initial
investors can realize a first-day pop in the stock," said Josef
Schuster, founder of IPOX Schuster, a Chicago-based IPO research and
Twitter Inc's successful IPO in November and a surge in Facebook
Inc's shares have fueled speculation that other tech firms could go
public, including music-streaming service Spotify, lodging website
AirBnB and mobile payments company Square.
However, Schuster and other analysts questioned if King could
maintain its breakneck growth rate.
"I think the valuation of a P/E ratio of 13 for a high-growth
company is indeed reflecting a skepticism about the ability to
continue growing at such a rapid pace," said Jay Ritter, a professor
and IPO expert at the University of Florida.
"The ability to come up with future games and get people to pay for
the game is a big question mark."
Riccardo Zacconi, who has led King since co-founding the company in
Sweden in 2003, will hold a 9.5 percent stake in King after the IPO.
Zacconi, 47, worked with online dating site uDate.com Ltd till it
was bought by InterActive Corp in 2002.
"Candy Crush" launched on Facebook in April 2012. The game was
released on Apple devices in November that year, followed by an app
for Android devices a month later.
The game has been downloaded more than 500 million times since its
launch. The basic games are free, but players must pay for add-ons
or extra "lives".
Such stellar popularity has helped King's revenue grow to $602
million in the fourth quarter of 2013 from $22 million in the first
quarter of 2012.
But most of that growth was fueled by "Candy Crush" rather than any
of the 180 games King provides through mobile phones, Facebook and
its own website.
King, which had 665 employees at December 31, has focused on
launching more games on mobile platforms, a market that analysts
expect will grow to $17 billion this year from just $6 billion in
Zynga's stock price has halved since its IPO in 2011 as the
popularity of "Farmville" waned, while Finland's Rovio has struggled
to replicate the success of "Angry Birds".
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Zynga acquired mobile game developer NaturalMotion for $527 million
and cut over 300 jobs this year, in an effort to narrow its focus to
To be sure, King's revenue for the quarter ended December 31
declined 3 percent from the preceding quarter, which the company
said was due to a fall in "Candy Crush" gross bookings.
However, bookings rose for its other games such as "Pet Rescue Saga"
and "Farm Heroes Saga". About 73 percent of total bookings in the
quarter came from mobile users.
King's five games for mobiles have drawn a "substantial fan base"
Zacconi said in a filing with the U.S. Securities and Exchange
"The opportunity in front of us is exciting: mobile usage is
exploding and games are commanding the lion's share of time spent."
King's IPO is scheduled to be priced on March 25, two underwriters
told Reuters. The stock will start trading on the New York Stock
Exchange under the symbol "KING" on March 26.
Of the 22.2 million shares on sale in the offering, the company will
sell 15.5 million, while stockholders, including Apax Ventures, will
sell 6.7 million shares, King said.
Unlike most other tech companies that have gone public recently,
King is profitable, has no debt and generated positive cash flow
from operations for each of the last nine years. It posted profit
before tax of $714.3 million in 2013.
In February, an average of 144 million daily active users played the
company's games more than 1.4 billion times per day.
At the top-end of the planned range, the IPO will raise as much as
$532.8 million, slightly more than the $500 million placeholder
figure it disclosed in its first public filing in February.
Entities related to Apax will own 44.2 percent of the company
following the offering, according to the IPO filing.
JP Morgan, Credit Suisse and BofA Merrill Lynch are lead
underwriters for the offering.
(Additional reporting by Neha Dimri in
Bangalore; editing by Maju Samuel and Savio D'Souza)
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