The King Digital stock price soared 14% today (Tuesday) after Activision Blizzard Inc. (Nasdaq: ATVI) announced an acquisition offer of $5.9 billion.
The Wall Street Journal reported that Activision will pay $18 per share, a 13.6% premium from Monday’s closing price of $15.54.
King Digital Entertainment Plc. (NYSE: KING) is best known as the maker of “Candy Crush” and its sequels to the popular series. “Candy Crush” is one of the top-grossing apps in Apple Inc.’s (Nasdaq: AAPL ) App Store, according to Market Watch.
Activision reported that the acquisition will provide it with a total of 550 monthly active users (MAUs). Research company Newzoo noted that the acquisition will provide an overlap of 24.5 million users who have played one of King’s games and one of Activision’s games in the past three months.
Activision is best known for its “Call of Duty” series, which has generated over $10 billion in sales worldwide since 2003.
With the King Digital acquisition, Activision now has a foothold in mobile gaming, an industry projected to reach $45 billion in revenue by 2018, according to mobile advisement company Digi-Capital.
The King Digital stock news certainly was favorable today. But ATVI stock owners want to know if the performance history of KING stock will be an indication of Activision’s future success…
The King Digital Stock Performance History
King Digital stock first traded on March 26, 2014. King priced its initial public offering (IPO) at $22.50 per share, and the stock opened at $20.50 on its first day of trading. It fell even further throughout the day and closed at a $19 per share, a 15% dip from the IPO price.
King Digital stock also faced wild swings after its earning statements. As Money Morning highlighted after 2014 Q2 earnings were released, the stock plummeted from its opening price of $18.94 before earnings on Aug. 11 to $13.94 on Aug. 14.
Before the acquisition, the King Digital stock price was still volatile in 2015 with a 52-week low of $11.63 and a high of $18.00
You see, King Digital has been viewed as a one-trick pony…
When “Candy Crush” reached full pandemonium in 2013, King reported $1.9 billion in revenue. In 2012, King only reported $164 million in revenue, which shows just how dependent the game maker was on “Candy Crush.”
When KING stock initially debuted, King Digital had a $7 billion valuation. That was almost 2.9 times more than the projected sales for the company in 2014.
This was a sign that the King Digital stock price was destined for volatility. As Money Morning Chief Investment Strategist Keith Fitz-Gerald warned before the IPO, “The first law of capitalism is to make money while the sun shines. For investors, this is probably nothing more than a fad.”
Jack Delaney is an Associate Editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.