King Digital Entertainment PLC (NYSE: KING) stock fell 15.6% Wednesday, its first trading day, in the worst initial public offering (IPO) debut of the year.
On Tuesday evening, Dublin, Ireland-based King Digital priced its IPO at $22.50, valuing the company at around $7.1 billion and making it the largest U.S. IPO from the mobile gaming industry in history.
But interested investors were glued to watching King's stock performance today as it debuted on the New York Stock Exchange.
"What's more important than the price is how it trades tomorrow and in coming sessions," Sterne Agee analyst Arvind Bhatia said to Reuters. "If the investors are in because they expect a quick profit and it doesn't happen because it doesn't get a lift, people will exit quickly."
Sure enough, KING stock debuted down in early-morning trading nearly 9% to $20.50 per share and lost even more ground throughout the day. Shares hit a low of $18.90 before closing at $19 per share - marking a 15.56% drop for King stock's opening day.
"It's a one-hit-wonder," Equities.com director of research and IPOdesktop.com president Francis Gaskins said to the Associated Press. "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."
Gaskins went on to say he believes investors may be anticipating another dip in revenue; the company's current quarter wraps up Monday. He posited that King may have fared better if it had gone public in September, at its peak.
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King offered 22.2 million shares at $22.50, raising about $500 million. J.P. Morgan Chase & Co. (NYSE: JPM), Credit Suisse Group AG (NYSE: CS), and Bank of America Merrill Lynch (NYSE: BAC) are acting as lead joint book-running managers for the offering.
The company's $7 billion valuation is nearly 2.9 times more than King's projected sales this year, according to a revenue estimate by Sterne Agee & Leach Inc.
"The first law of capitalism is to make money while the sun shines," Money Morning Chief Investment Strategist Keith Fitz-Gerald said earlier this year. "For investors, this is probably nothing more than a fad."
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