A Crush on King Candy?

News out today that King, manufacturers of the current hot mobile game Candy Crush, have filed for a $5.5bn IPO. We were asked what do we think?

- Based on a growth from a few $100m revenue in 2012 to $1.9bn in 2013, and real profits of c $570bn, a valuation of $5.5bn is tame by Dot Com 2.0 standards, but....
- ......King bases c 80% of its revenue on just 1 hit game
-. Hit Games come and go fairly rapidly, and there is no guarantee they can come up with a second hit game, so its quite conceivable that in another year they will be a few $100m company again, and worth nowhere near $5.5bn.
- Remember Zynga? Zynga share price collapsed after they failed to consolidate their success (see chart at top of page).
- King made c $570bn in proft last year, it has paid over $500 bn of dividends to its senior management and early investors, and its now looking for c $550 bn public investment - in normal times that counts as "things that make you go hmmmm..."
- However, its the Bubbletime (proof: Zynga shares rose after this IPO was mooted in September last year and hit a 52 week high after this IPO was announced today), so the best thing to do with a windfall year is rush through the IPO gate as fast as possible.

They may be able to replace Candy Crush with a "next hit" but the Gaming ecosystem is littered with the bones of companies that didn't The music industry's stage is littered with the bones of 1 hit wonderbands. The movie industry...well, lets see what Candy Crush 2 looks like.