‘Candy Crush’ Maker King Digital Sees up to $7.6 Billion IPO Valuation

“Candy Crush” IPO is expected to reach 7,6$ billion.

“Candy Crush Saga” creator, King Digital Entertinment Inc. believes that the game will be worth up to $7.6 billion when it goes public this month. Photo: Andres Leonardo Stangalini/Flickr

Amid all doubts regarding the popular game’s reliance, its creator, King Digital Entertinment Inc. revealed that it expects that the app will be valuated at $7.6 billion dollars.

King believes to benefit from its focus on the estimated $17 billion market for mobile game apps and don’t follow the fate of its less successful rivals such as Zynga Inc, which has struggled to make its games as popular on phones as they are online.

“Candy Crush,” which requires its users to match a line of three candies of the same color, was named the most downloaded free app and top revenue-grossing app last year. The game accounts for nearly three-quarters of King’s revenue.

Scotland-based game maker said on Wednesday it expects to price its IPO at $21-$24 per share, valuing it at up to $7.6 billion – slightly higher than Hasbro Inc, the 90-year old maker of Monopoly, Scrabble and Nerf.

“I think the bankers have priced the deal in a way so that initial investors can realize a first-day pop in the stock,” said Josef Schuster, founder of IPOX Schuster, a Chicago-based IPO research and investment house.

However, Schuster and other analysts wonder whether King could maintain its breakneck growth rate.

“I think the valuation of a P/E ratio of 13 for a high-growth company is indeed reflecting a skepticism about the ability to continue growing at such a rapid pace,” said Jay Ritter, a professor and IPO expert at the University of Florida. “The ability to come up with future games and get people to pay for the game is a big question mark.”

The IPO prospectus suggested that King’s app may appear to be money-making machine, as it generated about $1.9 billion in revenues last year, or $5 million a day.

“It posted adjusted earningsbefore interest, tax, depreciation and amortization of $825 million in the year, up from $28.5 million in 2012,”Reuters explains.

To compare, Zynga and Supercell, the company behind “Clash of Clans,” both managed to earn around $900 million in revenues in 2013.

While King’s revenue skyrocketed last year from the prior one, its fourth-quarter revenue declined sequentially, falling to $602 million from $621 million in the third quarter.

In its filing, ‘Candy Crush Saga” cretor attributed the decline to “a decrease in the app’s gross bookings, which was mostly offset by an increase in gross bookings across all of our other games.”

“The market is going to kick back a little bit after the Zynga experience,” Hickey said. “The challenge then for King is that they can maintain engagement on ‘Candy Crush,’ which is the majority of their performance, and that’s the issue they’ll have to work investors through.”

According to sources familiar with the matter, King’s IPO is scheduled to be priced on March 25, while the stock will start trading on the New York Stock Exchange under the symbol “KING” on March 26.

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