King Digital Entertainment PLC (NYSE: KING), the Ireland-based maker of the hugely popular Candy Crush Saga game for mobile devices, held its initial public offering (IPO) Wednesday morning. It offered 22.2 million shares at an IPO price of $22.50, the midpoint of the expected range of $21 to $24 a share. At the IPO price, the company is being valued at $7.1 billion.
But that stock price and valuation did not last long. In the first few minutes of trading shares fell as much as 10%.
At the IPO price, King Digital raised a total of about $499.5 million, with net proceeds of about $326 million. The company plans to use its proceeds for general corporate purposes, working capital and possible acquisitions.
The company sold 15.5 million new shares and existing shareholders sold the rest. The underwriters have a 30-day option on an additional 3.33 million shares from the selling shareholders. Lead underwriters are J.P. Morgan, Credit Suisse and Bank of America Merrill Lynch.
The big question about King Digital is whether it can create a follow-up to its blockbuster Candy Crush game. This hurdle has not been an easy one for mobile game makers like Zynga Inc. (NASDAQ: ZYNG) or Glu Mobile Inc. (NASDAQ: GLUU) to leap over. A lot of skepticism exists about King’s chances of breaking the pattern that the mobile game makers have followed.
Unless investors turn around on this stock, King is going to make a lot of bad news today. Prior to the offering, the worst thing most analysts could imagine happening is that the stock would trade higher on its IPO, then begin to slide. King’s stock appears to be skipping the first part of that scenario.
Shares were down about 9.2% at $20.50 shortly after 10 a.m. Wednesday morning.
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