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How Candy Crush Saga gave its parent company the worst IPO of the year

Above: King's next-biggest hit after Candy Crush Saga, Pet Rescue Saga.

Image Credit: King

Social-gaming publisher King doesn’t rule Wall Street.

The Candy Crush Saga maker had a rough first day trading on the New York Stock Exchange. The company went public and introduced its stock at $22.50. At the closing bell, its shares were trading at $19, which is down more than 15.5 percent. It continues to hover around $19 in after-hours trading as investors are seemingly looking back at Zynga to inform how they should look at King.

That makes King the worst initial public offering debut of 2014. Other companies that had disappointing IPOs include Eagle Pharmaceuticals (down 14.4 percent), UniQure (down 14 percent), and EP Energy (down 9.6 percent).

Despite the unimpressive IPO, King chief executive Riccardo Zacconi told GamesBeat that he isn’t worried.

“I wouldn’t be here if I was not confident,” Zacconi said. “The company has a great future. We are selling a very small amount of stock. We have been around for a long time. This is not unusual from what I have learned. I am super-confident.”

The stock never got above the $22.50 price that King announced yesterday. Instead, it experienced a steady decline to as low as $18.50 just before the end of trading.

It’s likely that investors are hesitant to buy into King due to its overreliance on Candy Crush Saga, which is its massive social game with 100 million active players. The puzzle game, which has players matching up pieces of sweets, generates millions of dollars for the company — it is actually responsible for 70 percent of the publisher’s revenues. King’s next biggest game, Pet Rescue Saga, only has 15 million monthly active users.

If Candy Crush Saga goes bust, it could tank King’s stock.

On top of those concerns, the company has stopped grabbing new monthly active users. It is steady at around 400 million MAUs, and that means it will have to start spending more to acquire player who will likely spend less.

Investors are also likely remembering Zynga, the last social-game publisher to introduce an IPO. That company went public in 2011 to great fanfare. After an initial pop that saw the stock trading at around $14 (up from the IPO price of $9.50), the company’s value deteriorated down to nearly $2. That led to a management shakeup that has former Xbox boss Don Mattrick as Zynga’s CEO.

Zynga is now trading at $4.64.

While Zynga started suffering on the market due to its reliance on Facebook, which has stagnated as a gaming platform, King is much better situated as one of the biggest publishers in the continually growing mobile space. It also is generating serious profit. The company earned $568 million in profit last year. That’s on $1.88 billion in revenues, and Candy Crush Saga continues to perform well this year.

That should give it some time to either build another major hit or to work on releasing a number of medium-sized games.

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More information:

Zynga Inc. is the world's largest social game developer with more than 232 million monthly active users playing their games which include CityVille, FarmVille, FrontierVille, Words With Friends, Mafia Wars, Zynga Poker, Cafe World, and... read more »

King is a leading interactive entertainment company for the mobile world, with people all around the world playing one or more King games. King has more than 190 fun titles in over 200 countries. Hits include Candy Crush Saga, Farm ... read more »

Don A. Mattrick (born 13 February 1964) is the CEO of social gaming company Zynga,as well as a member of its board of directors. Previously, Mattrick was the President of the Interactive Entertainment Business at Microsoft.In this role... read more »

As an innovative thought-leader in the world of web 2.0 technologies, Riccardo Zacconi adds his entrepreneurial spirit and passion for the world of online games and commerce to the success of King. Riccardo Zacconi is the CEO and co... read more »

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