King Digital Entertainment, the developer of the Candy Crush Saga mobile game, has set the terms on its IPO.
The company plans to offer 22.2 million shares at a range of $21 to $24. And if the King IPO is priced at the top of this range, the valuation would be about $7.6 billion. This compares to Zynga’s (ZNGA) $4.8 billion market and EA’s (EA) $9.1billion. Yet, as seen with other tech deals over the past year, it’s a good bet that the price will fetch a premium when the shares hit the market.
So yes, Candy Crush Saga is still crushing it. The game is ranked No. 2 on both Apple’s (AAPL) App Store as well as Google’s (GOOG) Google Play store. But investors in the King IPO will also be encouraged that the company doesn’t just rely on one hit. It has produced other top games, such as Pet Rescue Saga and Farm Heroes Saga.
But the fact remains that the King IPO will still be about Candy Crush – there were 97 average daily users in February — which has powered the company’s staggering revenue growth. Last year, revenues came to $1.88 billion, up from $164.4 million in the prior year.
King is also highly profitable. In 2013, net income was about $567.6 million, up from a mere $7.8 million in 2012. While games like Candy Crush Saga are downloaded for free, users can make in-app purchases for things like new lives or digital items.
However, there are some worrying factors for the King IPO. Consider that there has been a deceleration in installs, which fell from 76 million in December to 65 million in February. As seen with Twitter (TWTR), investors can get jittery when they see a flagging of user momentum.
But the King IPO is likely to be red-hot anyway. After all, investors can blame the slowdown on the natural cooling off from the holiday season. Besides, there continues to be heavy demand for tech IPOs, especially for companies that are top operators in mobile.
King IPO Details
- Expected Offering Date: March 26
- Ticker: NYSE:KING
- Lead Underwriters: J.P. Morgan Chase (JPM), Credit Suisse (CS) and Bank of America Merrill Lynch (BAC)
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.