King will price its long awaited initial public offering Tuesday and likely begin trading Wednesday. It will offer 22 million shares priced at between $21 and $24. The Wall Street Journal’s Marketwatch reported on the prospects. The experts it spoke to are worried King’s reliance on Candy Crush Saga make it a bad long-term bet. In its filing with the SEC, King admitted more than 80 percent of its profits come from the popular match-three puzzler. Its 2013 digital revenue came to $1.88 billion thanks in large part to Candy Crush’s 144 million daily users.
Matthew Turlip, analyst with financial data provider PrivCo, believes King’s IPO is another Zynga, describing both companies as a “one-trick pony.” Zynga launched at $10 a share, and is now trading at less than $5 a share. Investors found it to be too heavily reliant on FarmVille. Players have also accused it of running games such as YoVille into the ground.
Finding a hit game is difficult whether you’re talking about consoles or browsers. But console game publishers have a much easier time milking hit franchises. If Madden NFL or Assassin’s Creed makes you a bunch of money, you make another one next year. Second installments of FarmVille and Mafia Wars failed to live up to their predecessors. Some “core gamers” blast casuals and their taste in games, or perceived lack thereof. But they have been far less likely to bite on sequels with minimal changes.
Michael Pachter thinks analysts are underestimating King’s staying power.
“They aren’t a one-hit wonder, they’re a four-hit wonder,” he told Bloomberg News. “If the numbers show that’s sustainable, they’ll get more than the $5 billion.”
The $5 billion in question is King’s estimated valuation after the stock offering. Pachter thinks it could go as high as $7 billion. While Candy Crush Saga is King’s undisputed heavyweight, Pet Rescue Saga, Farm Heroes Saga and Papa Pear Saga are all among Facebook’s 10 most popular games.