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Last week, King Digital Entertainment PLC (NYSE: KING) officially begin trading on the New York Stock Exchange. The maker of popular mobile game "Candy Crush Saga" has priced its shares at $22.50. The 10-year-old company raised $500 million at this price.
However, reports suggest that company leaders are disappointed, given that they had set a target goal up to $24 a share. The IPO is valued at about 2.9 times more than King's projected sales this year. While that figure is scary enough, our Tara Clarke writes at Money Morning, there are three more statistics that investors should worry about when it comes to this IPO.
"First, King's similarity to IPO disaster Zynga Inc. (Nasdaq: ZNGA) should serve as a dire warning.
Second, King's games' popularity is our second reason King stock will be a bad bet for investors.
The company's most popular game, "Candy Crush Saga," currently accounts for three-quarters of King's total revenue.
The final reason the King IPO is a bad bet is perhaps the most striking and has to do with the company's user base.
Take a look inside King's IPO filing from Feb. 18. Therein, the online gaming company revealed that its average monthly payers have already declined by 1 million since the third quarter of 2013. Its Q4 numbers for revenue, profit, and adjusted earnings are also falling."
Should You Invest in IPOs
Michael Robinson, our in-house tech guru and the editor of our Radical Technology Profits advisory service and weekly newsletter Strategic Tech Investor, recently explained how to capitalize on the white-hot IPO market.
"High-tech IPOs are white hot right now, which is why many investors are trying to figure out how to invest in the 2014 IPO market. But it's easy to look in the wrong places for IPO profits…"
2014: The Year For Record-Breaking IPO Profits
So far in 2014 IPOs have averaged one month returns of 36%, 10% higher than 2012 and the closest returns recorded since the peak in 2000.
Source: Dealogic – http://www.dealogic.com/
It's another busy week on the IPO calendar as 10 companies make their public debut in the United States.
The IPO calendar has been packed this year, with 40 companies going public year to date. And this week we see another four companies make their public debuts.
Read more stories about IPOs.
With the Twitter stock IPO now official as of today (Thursday), the inevitable comparisons to Facebook Inc. (Nasdaq: FB) and its disastrous IPO no doubt will accelerate.
Stay tuned for the latest KING IPO updates.
- King: March 25, 2014 Press Release
- U.S. Securities and Exchange Commission: King's IPO Paperwork
- Reuters: Candy Crush Game Maker's IPO to Face Investor Scrutiny
- Reuters: 'Candy Crush' Maker King Scores $7.1 Billion Valuation in IPO
While King flops, you can profit elsewhere: Buy These Shares… Before Google Does.