Candy Crush Maker King Prices Shares At $22.50, Puts Valuation At $7B

In the most anticipated gaming IPO of the last few years, Candy Crush Saga maker King priced its shares at $22.50 in an offering that will raise $326 million for the company and value it at slightly more than $7 billion. Shares will trade for the first time tomorrow.

That valuation will put King at nearly four times its trailing annual revenue of $1.88 billion. The vast majority of that revenue came from the mega-hit Candy Crush Saga, which pulled in 78 percent of the company’s bookings.

That valuation also makes King worth more than 1.5 times Zynga’s market capitalization and puts it slightly south of EA’s $9 billion market capitalization.

The IPO ends one chapter of the company’s 10-year-long journey and is a big test of public investor appetite for gaming companies. The last notable gaming IPO was Zynga’s, and that company saw its shares decline by about 75 percent in the year after it went public on concerns that it missed out on mobile gaming and was seeing its player base erode on the Facebook platform.

Since then, other companies have decided to stay off of public markets. Supercell, which made $892 million in annual revenue off Clash of Clans and Hay Day, decided to sell more than half of itself for Japanese mobile carrier Softbank and gaming company Gung-Ho Entertainment last year. Still others, like the U.K.’s NaturalMotion, decided to sell to Zynga for roughly a half-billion dollars.

So this is a big test of free-to-play casual gaming. The concern is that King may not be able to follow up with another mega-hit after Candy Crush Saga. Indeed its quarter-over-quarter revenues declined to $601.7 million from $621 million in the most recent earnings period, according to the company’s IPO filing.

King is arguing that it has a slightly different strategy than that of Zynga. While Zynga seeks to own specific categories or genres in gaming like farming or casino, King mines a historical repertoire of games from a longstanding web-based destination that attracts a small group of dedicated casual gamers. That’s where it was able to pull titles like Candy Crush Saga from and redesign them from the ground-up with mobile devices in mind.