King Digital Entertainment Plc raises 500 million dollars in its IPO

The maker of the popular “Candy Crush” smartphone game – King Digital Entertainment Plc made an official statement, revealing that it managed to raise 500 million dollars in its initial public offering. The valuation of the company after its IPO was 7.09 billion dollars.

According to the companys statement, King Digital entertainment Plc and its shareholders Apax Partners LLP and Index Ventures offered its shares for 21 to 24 dollars per share and managed to sell 22.2 million shares at a price of 22.50 dollars each. The sale raised $350 million for King and another $150 million for its early investors.

As Bloomberg reported, the publicly traded peers of the company, such as Giant Interactive Group Inc. and Zynga Inc. have been offered the shares at a discount.

The company posted a 2013 profit that is estimated to 567.6 million amid a revenue growth, which reached almost 1.9 billion dollars. It looks like King is looking at a relatively modest valuation unlike some of its peers. The estimate of Sterne Agee & Leach Inc. shows that King Digital Entertainment Plc will debut at a multiple of 2.7 times forecast sales. One of the analysts working for Sterne Agee – Arvind Bhatia – also projected that the 2014 revenue of the company will amount to 2.62 billion dollars.

According to the details about the IPO, as much as 78% of the annual sales of the company are generated by its “Candy Crush” game, and more precisely, by the purchases of virtual items such as additional content, extra lives, etc., which are sold at about 1 dollar each. The game is reported to have 97 million active users on a daily basis.

Mr. Rob Romero, who works as a portfolio manager for Connective Capital Management LLC commented for the Wall Street Journal: “Theyre being honest with investors regarding their slowing growth rate, which I think is helpful. They need to be able to generate new games and successfully develop and market their new-game pipeline to replace the revenue that will inevitably be lost when Candy Crush begins to decline. And they have such a pipeline.”

A spokesman of King Digital Entertainment Plc refused to make any comments on the assessment the company got from investors and analysts, explaining that the company prefers to stay quiet during the period around its initial public offering.