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Candy Crush: Will its IPO be sweet for King Digital Entertainment?

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Here's for the readers who have tooth for sweet news: an addictive online game - that players say crush most of their time - is about to have an initial public offering (IPO).

Game-maker King Digital Entertainment has disclosed Candy Crush is set to go public this coming week. The company based in Dublin, Ireland is only one of the 14 companies to similarly offer IPO.

King will present its IPO price on Tuesday night and begin trading its shares on Wednesday at the New York Stock Exchange with its ticker symbol "KING." It plans to sell around 22 million shares with estimated price per share pegged between $21 and $24.

This would bring about $7 billion market value to the entire company. It will also place the company on a quite similar level with Hasbro, the maker of infamous games like Scrabble and Monopoly.

Chief executive Tim Keating of Keating Capital, however, said that King might still be valued fairly when compared to its rivals such as Activision and Zynga Inc. Activision has about $15 billion market value, while Zynga has around $4 billion.

King's brochure states that it only earned $164 million and profited $7.8 million in 2012. The year 2013 came as a big surprise, though, with annual revenue of $1.9 billion and profit of around $568 million. Research says Candy Crush in fact placed the company at the forefront of the gaming world, after being held in the backwaters for the last 11 years.

Keating though disclosed there are investors who worry over the profits of King being too narrowly clenched to the success of a sweet single game. Eighty percent of King's revenue comes from the said online game.

"King is a hit-driven business with one game, Candy Crush, driving most of the revenue," Kathleen Smith, principal at Renaissance Capital, also said. Renaissance Capital is an IPO research firm and investment adviser. 

A sequel to Candy Crush should continue to attract more users to justify its IPO, critics suggest. If not, possibly the best illustration of a gaming company failing to maintain its users' interest is Zynga, the creator of FarmVille and CityVille. Its share price went down in 2012, and average daily revenue per player dropped 10 percent.

Nevertheless, further research confirms King shows strong profit margins as well as an enormous revenue growth in 2013. 

James Surowiecki of The New Yorker magazine also wrote an observation saying that a one-hit wonder company - such as King - going public is not a good idea. He said the company has ample fund to create new cheap games while at the same time has the added pressure of trying to meet the expectations of quarterly analysts.

Renaissance Capital says there are 53 new listings in the United States this year. Compared to the same period in 2013, only 30 companies had IPO.  With such data, estimates show that the total number of IPOs in 2014 could outweigh or compete with the recorded 222 total in 2013. Since 2000, 2013 so far showed the highest number of IPOs.

The research firm further added that most stocks that launched this year outperformed the broader market. An average IPO, for instance, had a 35% increase from its price offering this year.

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