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King disappoints on debut

Those hoping for first-day bounce for stock market debutant King were disappointed, as the shares quickly dropped to $20.50.

Expectations had been cautiously high ahead of today’s listing, as grey market indications suggested a 20% rise in the share price following the beginning of trading. However, trading failed to live up to expectations, as we are seeing the price brushing the $20.25 level. This values the company at around $5.68 billion, or 11.2 times earnings.

Like many things, the company’s greatest strength, its hugely popular game Candy Crush, is also its greatest weakness. Three quarters of the revenue in the final-quarter of last year were driven by Candy Crush, meaning the company is highly dependent on this one vehicle.

Ultimately, we will have to wait and see. The company may well enjoy a run of successes – it clearly knows how to design games that can hook the attention of casual gamers. If it can, we could see the share price continue to rise. However, if it runs into trouble in a similar fashion to Zynga, King’s shares could struggle to maintain its appeal for investors. 

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