King Digital Entertainment PLC (NYSE: KING) is taking Candy Crush to China. The mobile games maker announced early on Friday that a localized version of Candy Crush Saga is now available for players in China.
24/7 Wall St. would bring up an issue here before anyone gets too hot and bothered about a new launch into China. While it seems a given that this will add new users and revenues, what needs to be asked is if the market will reconsider this as fresh news or just a completion of old news.
King’s deal with Tencent was first announced in mid-April, just weeks after King’s initial public offering. And note that when King’s lower guidance for 2014 was issued just 10 days ago, a Tencent partnership was mentioned then again as well.
The Chinese version of the game is said to be now integrated with Tencent’s Mobile QQ and Weixin social network, and it is also said to be available in Tencent’s App Center and Apple’s App Store in China. Tencent is a top Internet services firm in China and is said to have the largest mobile social network in the nation with hundreds of millions of users.
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King Digital reduced its 2014 outlook with earnings, announced a $150 million special dividend and announced an extended lockup period for interests that represented up to 80% of the outstanding shares. That was just on August 12. We can only assume that management included any expected benefits of this Tencent deal in China being at least somewhat likely certain when they issued that lower guidance. Here is a snippet of what was said in the press release on August 12:
… and broadening our geographic reach with the initial rollout of a localized version of Candy Crush Saga in China in partnership with Tencent. While our second quarter gross bookings came in below our expectations leading us to reduce our outlook for full-year 2014 growth rates, from a profitability perspective …
Sometimes there is a news feedback loop. It is good that the Tencent deal with China is finally available, but perhaps the press release named “Sweet! Candy Crush Saga Launches in China” is missing the word “Finally!” at the end or beginning.
King shares closed out Thursday up almost 2% at $13.34, but that is still way down from the $18.20 closing price before earnings were issued on August 12. This is one of those instances where it seems like the classic “buy the rumor, sell the news” situations. The other side of the coin is that this isn’t bad news.
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