Candy Crush maker raises $500m in IPO

Candy Crush maker King Digital Entertainment has raised $500 million in its initial public offering, pricing the shares in the middle of the marketed range.

King and shareholders Apax Partners LLP and Index Ventures sold 22.2 million shares for $22.50 each, according to data compiled by Bloomberg, after offering them for $21 to $24.

The IPO price values King at $7.09 billion.

Candy Crush, a puzzle game featuring different colored candies, has 97 million daily active users and accounts for as much as 78 per cent of King’s annual sales, the IPO prospectus shows. King generates revenue when users purchase virtual items, such as extra lives or additional game content.

Its other games, including Farm Heroes Saga, and Bubble Witch Saga, each have fewer than 20 million daily active users.

The Dublin-based company priced at the midpoint of the range after offering the shares at a discount to its publicly traded peers, including Chinese game developer Giant Interactive Group and Zynga, data compiled by Bloomberg show.

King will debut tomorrow at a multiple of 2.7 times projected sales.

The company is on track to post $2.62 billion in revenue this year, according to a projection by Arvind Bhatia, an analyst at Sterne Agee and Leach. While that would reflect a 39 per cent increase from 2013, it’s slower than the 1,000 per cent annual jump from 2012, the prospectus shows.

Giant Interactive trades at 6.3 times estimated 2014 sales, and Zynga fetches 5.2 times. Activision Blizzard, the largest US video-game publisher, trades at 3.2 times estimated 2014 sales.

King's discount may reflect lessons investors learned following Zynga's debut. The maker of FarmVille went public in December 2011, dropped 5 per cent in its debut and slumped almost 80 per cent in the subsequent year. Zynga's revenue, like King's, was concentrated in one major source at the time of its IPO: more than 90 per cent of its sales came from Facebook.

Shares continued to slide as Zynga’s users started defecting to Candy Crush. Unlike Zynga, which hasn’t posted an annual profit since it went public, King’s after-tax profit margins were 30 per cent last year, its prospectus shows.

King’s shares will start trading tomorrow, listed on the New York Stock Exchange under the symbol KING. (Bloomberg)