By Sven Grundberg,, Telis Demos and Ben Fox Rubin
King Digital Entertainment PLC, the maker of the popular "Candy
Crush Saga" smartphone game, said Tuesday that it filed for an
initial public offering of up to $500 million on the New York Stock
Exchange.
The company hasn't yet decided on an IPO price or stock-market
valuation, people familiar with the matter said. But the company is
aiming for a multiple of earnings on par with gaming companies such
as Electronic Arts Inc. and Activision Blizzard Inc., a person
familiar with King's thinking said. That could peg the company at
roughly $8 billion to $10 billion, depending on what investors
predict for next year's earnings.
King intends to apply to list on the NYSE under the symbol
"KING."
King, with offices in London and Stockholm, has risen to
prominence amid the rapid rise of phone-based games for Apple
Inc.'s iPhone and phones running Google Inc.'s Android operating
system.
King is best known for it hugely popular and profitable Candy
Crush game, which was launched on Facebook Inc. in April 2012. The
game has been leading top-grossing games charts and has been one of
the most frequently downloaded free apps from the iPhone's App
Store and Google's Play.
The company said it intends to allow some of its shareholders to
sell into the IPO, according to the filing. About half of the
company is owned by Apax Partners, a European private-equity firm,
and 10% by Riccardo Zacconi, co-founder and chief executive.
Another 8% is held by venture-capital firm Index Ventures.
In its filing, King said the company has posted enormous growth
in a few short years. In 2013, the company reported a profit of
$567.6 million, up from $7.8 million in 2012. Revenue jumped to
$1.88 billion, up from $164.4 million.
By comparison, Zynga Inc., another top games maker, had revenue
last year of $873 million, while Finland's Supercell Oy reported
revenue of $892 million. In October, Japan's SoftBank Corp. bought
a 51% stake in Supercell for $1.5 billion, the largest-ever
investment in a mobile game company.
Revenue in $ thousands 2010 2011 2012 2013
King 58,448 63,901 164,412 1,884,301
Supercell 200 101,000 892,000
Zynga 597,459 1,140,100 1,281,267 873,266
King, founded in 2002, has been around longer than both Zynga
and Supercell. Candy Crush--a colorful and addictive puzzle game
that reaps revenue from in-game "power-ups"--is being played by 93
million people every day, and is played more than a billion times
every day, King said in its filing.
King said its mobile games have been installed 500 million times
in total, from the launch of its first mobile game, "Bubble Witch
Saga," which it released for mobile phones in the summer of
2012.
The big question: How sustainable is that growth?
Overshadowing any King IPO will be the Zynga's experience, which
listed in 2011. Zynga shares have performed poorly since their
debut, falling more than 50%, as investors question whether it will
be able to reliably produce hit games for mobile devices like it
previously did for Facebook.
The company's revenues fell over the course of 2013, and the
company has been posting losses for three years straight.
King will likely face investor questions about what
differentiates it from Zynga, and how it can continue to match the
fickle tastes of mobile gamers.
In its filing, King acknowledged "a small number of games
currently generate a substantial majority of our revenue."
Specifically, in the fourth quarter of 2013, its top three
games--Candy Crush, "Pet Rescue Saga" and "Farm Heroes
Saga"--accounted for 95% of its total gross bookings, it said.
Candy Crush, in particular, accounted for 78% of its total gross
bookings.
"If the gross bookings of our top games, including Candy Crush
Saga, are lower than anticipated and we are unable to broaden our
portfolio of games or increase gross bookings from those games, we
won't be able to maintain or grow our revenue, and our financial
results could be adversely affected," the company said in its
filing.
Though hit titles can be fleeting, the mobile gaming business
still offers significant opportunity. Mobile and tablet games
globally were estimated to have produced revenue of $12.2 billion
last year, according to EMarketer Inc., a market research service.
That would be a 34% jump from 2012.
And recently, King showed it is no one-hit wonder. Last year, it
launched a new game, "Papa Pear Saga," that joined Candy Crush in
the 10 most-downloaded apps for Apple devices in December,
according to AppAnnie, which tracks app downloads and revenues.
King said it chose J.P. Morgan Chase & Co., Credit Suisse
Group AG and Bank of America Merrill Lynch to take top roles in the
IPO.
Write to Telis Demos at telis.demos@wsj.com and Ben Fox Rubin at
ben.rubin@wsj.com
Order free Annual Report for Activision Blizzard, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US00507V1098 or
call +44 (0)208 391 6028
Order free Annual Report for Apple, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US0378331005 or
call +44 (0)208 391 6028
Order free Annual Report for Electronic Arts, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US2855121099 or
call +44 (0)208 391 6028
Order free Annual Report for Facebook, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US30303M1027 or
call +44 (0)208 391 6028
Order free Annual Report for Google, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US38259P5089 or
call +44 (0)208 391 6028
Subscribe to WSJ: http://online.wsj.com?mod=djnwires