Candy Crush parent slides 11% on the first day of trading after raising $500m in IPO

King Digital Entertainment, the Irish-headquartered maker of the Candy Crush smartphone game, slid on the first day of trading after raising $500 million in its initial public offering.

The shares dropped 11 per cent to $20.04 by lunchtime in New York, after the IPO was priced at $22.50 each. King and shareholders Apax Partners and Index Ventures had offered the stock for $21 to $24.

At the IPO price, King is valued at $7.09 billion, which makes it cheaper – relative to projected sales – than publicly traded peers including Giant Interactive Group and Zynga.

That may have had investors betting that they could profit from a quick jump in the shares once they began trading, said Jeffrey Sica of Sica Wealth Management. Instead, concern that the popularity of Candy Crush will wane is weighing on the shares, he said.

“There were a lot of people hoping for momentum off the open and that didn’t happen,” said Mr Sica, whose firm oversees more than $1 billion.

The company will prove it can execute on new games and continue to deliver good metrics, said Hope Cochran, King's chief financial officer.

King shares were offered at a multiple of 2.7 times projected sales of $2.62 billion, based on an estimate from Arvind Bhatia, an analyst at Sterne Agee and Leach. Giant Interactive traded at 6.3 times estimated 2014 sales, and Zynga fetched 5.2 times as of yesterday's market close. Activision Blizzard, the largest US video-game publisher, traded at 3.2 times estimated 2014 sales.

Candy Crush , a puzzle game featuring different-coloured sweets, has 97 million daily active users, the IPO prospectus shows. It accounts for 78 per cent of King’s sales, which King generates when users purchase virtual items, such as extra lives or content, for about $1 apiece.

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