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Candy Crush dev valued at $5 billion in expected IPO

Candy Crush dev valued at $5 billion in expected IPO

Fri 27 Sep 2013 3:06pm GMT / 11:06am EDT / 8:06am PDT
BusinessFinancial

King has filed documents for an initial public offering in the US

King, the British game firm behind the wildly popular Candy Crush Saga, is preparing to float on the Nasdaq. The company has filed its pre-IPO S-1 paperwork with the Securities and Exchange Commission, "taking advantage of the same loophole for rapidly-growing businesses that allowed Twitter to keep its IPO confidential," notes Telgraph.

The IPO is expected to value King at around $5 billion; Zynga, by comparison, has a market capitalization of around $2.9 billion. That said, King will have to convince investors that it has a better strategy in place than when Zynga filed for its IPO. Facebook games, as Zynga discovered, aren't as popular as they were a couple years ago. King just last month said it was shutting down five of its online titles to concentrate on its big hits like Candy Crush. The company also decided to cease its in-game advertising to improve the user experience for players.

No doubt in preparation for its IPO, King also just this week hired a new CFO, Hope Cochran, who comes to the developer from Clearwire.

14 Comments

Jakub Mikyska
CEO

197 1,044 5.3
Popular Comment
This clearly has "Zynga" written all over itself.
I don't blame the shareholders of King for wanting to capitalize on their success, but I don't understand who could invest in them and hope to make money.

Posted:10 months ago

#1
I dont understand the valuation considering the software they sell is not re-occurring annual revenue.

Posted:10 months ago

#2

Adam Campbell
Associate Producer

1,136 914 0.8
InB4Zynga =|

Yeah, I find it worrying. I fear the valuation places too confidence on number of players and not revenue. King have decided to reduce their portfolio and focus on Candy Crush, what happens when people stop playing it?

Posted:10 months ago

#3

Greg Wilcox
Creator, Destroy All Fanboys!

2,132 1,039 0.5
@Adam: (warning, insert tongue in cheek, then proceed): Surely you jest! I was at the DMW Conference last week and Patcher went on a minor (Wild?) tangent about his and John Riccitello's Candy Crush scores and what levels they're currently at. That cracked me up (as well his him dismissing the lot of console owners as "not many" as if 250 million of anything didn't matter in regards to mobile gaming, which is probably more unstable these days than some want to believe).

As to how they'll make money? SIMPLE. "Free" Candy Crush for all the investors! Whee. Who doesn't love free? And free candy at that. You can CRUSH it! Whee!

Anyway, it's a more kawaii version of Breaking Bad. Get them addicted and they'll pay, unlike speculators in other gaming companies who don't even own a console and just toss money at what stock tips they farm up from wherever. Hell, I bet more people will want to snap up this stock because EVERYONE plays them some Candy Crush, right? RIGHT?

Eh, we'll see what happens, but I'm betting they all think CC will be around forever and a day. Or they think it won't drop off when the next big thing rolls out that people get addicted to and throw money at just to get their fix...

Posted:10 months ago

#4

Patrick Frost
QA Project Monitor

387 180 0.5
Totally baffling... I wouldn't claim to know the mobile side of the industry well at all but to me these guys seem like an unknown quantity and anyone wanting to invest in them is taking a massive risk. If anything, floating the company like this seems like a sign of desperation and the stakeholders wanting to cash out of the business. Doesn't sound like they think it's going to be able to produce such success again in the future does it?

Posted:10 months ago

#5

Graham Simpson
Tea boy

219 7 0.0
"The company also decided to cease its in-game advertising"

In other words, they are losing customers because of the ads. Remove the ads and lose the revenue. Enter the IPO and other peoples money for them to burn. 3 letters... A...P...B

Posted:10 months ago

#6

Bruce Everiss
Marketing Consultant

1,692 594 0.4
There are three ways to value a company.
1) The purely actuarial method of discounting back the cashflow of future earnings.
2) Sentiment. This is mostly driven by fear and greed. On the greed side people want to buy into the next Apple.
3) Supply and demand. Global equities have risen recently because the world is awash with American QE money.

KIng could be a flash in the pan, a one hit wonder. In which case it is overvalued. Or it could be the new Activision (but in a much bigger market), in which case it is undervalued. It is up to you to decide which you think that it is and to deal with your money accordingly. The problem we have is that most investors are "professionals" spending other peoples' money with little risk to themselves.

Posted:9 months ago

#7

Tom Keresztes
Programmer

632 239 0.4
Zynga 2.0

Posted:9 months ago

#8

Bruce Everiss
Marketing Consultant

1,692 594 0.4
I don't think that this is Zynga 2.0

Here's why:
1) Zynga were well out in front of anyone else in their market. King is just one of several game companies with great current success in their market.
2) Zynga had a broad catalogue of very successful titles.
3) Zynga were stuck on a burning platform with no strategy to get off.
4) Zynga brought something new to the game industry. Intense use of metrics, Skinner Boxes etc. They changed the industry and moved it on.

Edited 1 times. Last edit by Bruce Everiss on 30th September 2013 9:55am

Posted:9 months ago

#9

Alfonso Sexto
Lead Tester

766 574 0.7
It is too soon to label this with the Zynga Stigma. We'll have to wait and see.

Posted:9 months ago

#10

Tameem Antoniades
Creative Director & Co-founder

196 164 0.8
Gott im Himmel!

Posted:9 months ago

#11
I think this is another sign the mobile party is over.

When Newsnight starts running pieces on the evils of IAPs and governments start stepping in it's obvious people are starting to get savvy that "Free To Play" is anything but Free and as a result parents aren't going to allow their kids to play these games at all. This market (not mobile in general but F2P aimed at kids) could drop quicker than Facebook.

Posted:9 months ago

#12

Raf Keustermans
CEO, co-founder Plumbee

28 2 0.1
$5b is a lot, but let's not forget a couple of things:
- King has been around for 10+ years, their King.com skill gaming portal alone is a $50M+ business with decent profit margins
- Candy Crush is obviously their mega hit, probably doing $500M+ in annual revenue, but they have a lot of 'smaller' hits like Pet Rescue Saga, Farm Heroes Saga, ... that are also bringing in close to $10M per month each.
- It's a much more profitable company, with less headcount than Zynga (2500 vs 600 staff), I guess their current revenue is around the same as Zynga when they went public (for 3x $5b!) and King is growing faster.

Assuming their 2013 revenue will be around $750-800M with 30% EBITDA, the $5b (reported) valuation is aggressive but not silly.

Posted:9 months ago

#13

Adam Campbell
Associate Producer

1,136 914 0.8
It is too soon to label this with the Zynga Stigma. We'll have to wait and see.
I think early caution is better than sad faces later on. Zynga needs to be a lesson and we need to learn where this value is coming from and how it can be sustained as something tangible in the long term.

I agree that we'll have to wait and see however, with less of an "oh its not Zynga" attitude. It wouldn't be the first over-valued company and it won't be the last to go bust if things turn out the wrong way.

I'm not necessarily saying this is a wrong valuation but I'm very cautious.

Edited 1 times. Last edit by Adam Campbell on 30th September 2013 8:58pm

Posted:9 months ago

#14

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