King IPO is Filed on NYSE
FEB. 18, 2014 • After spending several years mulling over its options, skill games company King has filed for a $500 million IPO on the New York Stock Exchange. The maker of the popular Candy Crush Saga intends to use the symbol KING. Bank of America Corp., Credit Suisse Group AG, and JP Morgan Chase & Co. are the coordinators of the stock sale. Funds generated by the IPO will be applied toward acquisitions and working capital. Early estimates are that King will be valued somewhere between $5 billion and $7 billion. As part of the filing a new holding company based in Dublin, Ireland – King Digital Entertainment plc. – has been created. Previously King had been headquartered in the United Kingdom. The new entity takes the place of the former parent, Midasplayer International Holding Company p.l.c., chartered in Malta. King Digital Entertainment plc. will retain 100% control over the numerous King subsidiaries that each handle a specific roles from game design, R&D, payments to sales. Last December the company says it averaged 128 million daily active users and 1.2 billion daily game plays. King saw its profit jump from $8 million in 2012 to $568 million on revenue of $1.9 billion in 2013.
Impact: While it is fashionable to explain away King’s No. 1 success on Facebook and iTunes based on Candy Crush Saga alone, the game maker has more than 180 game IPs in its stable and a decade of sustained success. King has had significant hits before with Miner Speed and Bubble Witch Saga. How King got to where it is today has more to do with lean production expenses, and an early devotion to skill titles that generated substantial revenue as players bet their expertise against each other for real money. Often King’s three-person development teams can turn out a new title in 20 weeks. As a closely held enterprise, knowledge of many aspects of King’s operations proved murky over the years, especially its online casino business under the Royal Games brand. Yet King’s primary focus these days is casual social franchises. What helped make its Saga titles so successful was an early strategy to take these franchises to smartphones with links back to the social network versions. That’s how King has clawed it way to the top of the charts during the last three years. Which makes the present the perfect time to file for an IPO. We see no reason why King’s strategic formula should not continue to be successful. That said it is always wiser to take the public plunge when you’re on top of the world. While we were skeptical about Zynga, we think King may have a more sustainable model. However trying to maintain those margins will be a challenge.