Seeking Alpha

King's IPO valuation conservative; Zynga, Glu Mobile gain

  • Two underwriters tell Reuters King Digital's (KING) IPO will price on March 25, and begin trading the next day. The company is looking to raise $326M-$372M by selling 15.5M new shares, and is offering 6.7M shares on behalf of existing holders.
  • King's $21-$24 price range implies a valuation range of $6.7B-$7.6B, or a fairly conservative 3.4x-3.8x 2013 bookings of $1.98B. The pricing undoubtedly reflects concerns about King's heavy dependence on Candy Crush Saga (responsible for 78% of Q4 bookings and 73% of December DAUs), in spite of the popularity achieved by several of the company's other titles.
  • The New Yorker's James Surowiecki: "The company didn’t make eighty times more in 2013 because it had cracked a code; it just caught lightning in a bottle ... Development costs in the game-app world are very low ... As a public company, King will have to show shareholders consistent results and ever-growing profits."
  • Peers Zynga (ZNGA +2.4%) and Glu Mobile (GLUU +4.2%) are moving higher today. Excluding cash/investments and the impact of the pending NaturalMotion deal, Zynga, whose bookings have nosedived over the last several quarters, trades at 4.9x 2013 bookings.
  • Previous: King's Q4/2013 numbers
Comments (17)
  • haleiwahu
    , contributor
    Comments (3672) | Send Message
     
    When NaturalMotion becomes a moving asset of ZNGA and they begin trading at 6xbookings or more, Z could easily double in stock value. Still waiting for news on how & when Bitcoin and ZYNGA will hook up.
    12 Mar 2014, 12:57 PM Reply Like
  • Mbrillo1
    , contributor
    Comments (414) | Send Message
     
    O' Hal,
    I never would have thunk it. A Zynga believer?
    Not Bitcoin pal, Microsoft.
    That is what I wrote about.
    Didn't you hear me?
    12 Mar 2014, 10:40 PM Reply Like
  • haleiwahu
    , contributor
    Comments (3672) | Send Message
     
    Aloha M - I understand that and I heard you loud and clear, but Z did claim to hook up with Bitcoin, so I am concerned how that will work out since Bitcoin has had some floundering in recent months.

     

    http://bit.ly/1fTP2p4
    17 Mar 2014, 05:47 PM Reply Like
  • riffat
    , contributor
    Comments (56) | Send Message
     
    I am so glad that GLUU will continue rising until the IPO, possibly hitting $6 soon.
    12 Mar 2014, 01:06 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1161) | Send Message
     
    Zynga will drop as soon as that King IPO starts trading. Most Zynga investors hold it only to gain exposure to the hot mobile gaming sector, not because of Zynga's horrible performance. Once there is the possibility of owning an actual growing mobile gaming company that can make actual hits, there will be no point whatsoever in holding Zinga.
    12 Mar 2014, 02:07 PM Reply Like
  • dnorm1234
    , contributor
    Comments (1126) | Send Message
     
    >Once there is the possibility of owning an actual growing mobile gaming company

     

    Mr. Surowiecki nails it.

     

    No doubt they're printing money right now, but King faces the same problems Zynga does; they just happen to have the latest "hit" game. I'm not sure there are ANY of these companies that have been able to show consistency in this space. Users are fickle. The King "brand" isn't worth much. You willing to stake money on a single game producing 80%+ profit?

     

    I'd bet their IPO and future looks a lot like Zynga's: huge hype, fall back to realism. I've been long Zynga since $2.50, but it was admittedly a lottery bet (that's turned out pretty well).
    12 Mar 2014, 02:14 PM Reply Like
  • Milou
    , contributor
    Comments (5) | Send Message
     
    King is almost a 1 trick pony. Gluu has broad based games and setups. Zynga will enter mobile, is strong web based and has - to the contrary of King, RMG set ups in web and on FB. I expect more US States to allow online gambling, thus the potential for Zynga is very promising. King must show new games before I admit it be a better play on gaming than Zynga
    12 Mar 2014, 02:25 PM Reply Like
  • jameskm03
    , contributor
    Comments (110) | Send Message
     
    ATVI has a market cap around $14.5B. There is just no way this one trick pony is worth half that. EA has a market cap of $9.2B. Those that want to put growth projections on this probably need to get their heads out of the clouds a little.
    12 Mar 2014, 02:30 PM Reply Like
  • seven87
    , contributor
    Comments (14) | Send Message
     
    Couldn't agree more, James. I just cannot understand how Wall Street is valuing these companies. Ridiculous market caps and valuations are just the tip of the iceberg. The business model simply stinks and there's always someone out there with a reason to buy these kind of companies. I'm just glad I've stayed away from all these social media stocks. Have I missed out on massive gains? Probably. But I don't want to be the one caught with my pants down when sooner or later all these companies tank hard when realization hits that these stocks are overpriced by a country mile, to put it lightly.
    12 Mar 2014, 03:02 PM Reply Like
  • Mbrillo1
    , contributor
    Comments (414) | Send Message
     
    Right-o 87;
    you certainly missed nothing! Those business models will stink you
    up all of the time. You know, with their "Ridiculous market caps and valuations".
    As for those massive gains? Who needs them, anyways.
    Hang on to those pants, you never know.
    Social Media stocks? Trash!!
    12 Mar 2014, 10:40 PM Reply Like
  • Sellinpanic
    , contributor
    Comments (669) | Send Message
     
    GLUU is the multibagger here, $10 by June and going higher or acquired by a huge premium.
    12 Mar 2014, 04:07 PM Reply Like
  • Mbrillo1
    , contributor
    Comments (414) | Send Message
     
    Philip Marlowe,
    You have been writing bearish comments since July of 2013. All you are doing is "Beating a dead horse" who just will not die. Still carrying that short position?
    No armageddon here. Just your imagination.
    12 Mar 2014, 06:15 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1161) | Send Message
     
    "Beating a dead horse who just will not die". You really confused your metaphors there. Yes I still am holding my short position. My philosophy is to close shorts as soon as the real world turns against my thesis, but as far as Zynga goes, the real world just keeps confirming my short thesis.

     

    Zynga's bookings continue to drop. The fact that they bough another game studio to mask the deterioration of revenues does not change the fact that their bookings and revenues are dropping. And the funny thing is the company they bought seems to be losing revenues faster than Zynga.

     

    They have showed a complete and total inability to create new popular games in the last couple of years, and the fact they are planning to refresh a couple of their aging titles is not likely to improve things a great deal.
    12 Mar 2014, 06:35 PM Reply Like
  • dnorm1234
    , contributor
    Comments (1126) | Send Message
     
    >They have showed a complete and total inability to create new popular games in the last couple of years

     

    I agree with this, even as a Zynga long. It's a crapshoot. But, they're trying, and they have the infrastructure in place to find that game that "clicks".

     

    All it takes is one. King is a case in point.

     

    Let me be clear: I don't think any of these guys (ZNGA, King or GLUU) has any sort of competitive advantage. They are all prospecting for gold. But when I bought ZNGA it was pretty beat up, so it was a bet on the future and the ability of the company to get it together. It seems that buying into King at this point is buying in at the top. They're unlikely, at the very least, to reproduce the success of Candy Crush. This space is littered with the corpses of independent development shops that couldn't follow up their hit.
    12 Mar 2014, 06:55 PM Reply Like
  • Mbrillo1
    , contributor
    Comments (414) | Send Message
     
    No Phil,
    No mixture of metaphors. I can only imagine you standing over this company beating
    it and beating it while crying "Die. Die. You beast, I have killed you again and again! Die!"
    To no avail.
    I cannot believe that you have withstood a short while the stock doubled, maybe triples?
    Wait until the next quarter. You will eat another quarters pain. No, you will not have to
    wait. Watch. First, an upgrade by a major. Then, another sweet announcement.
    It is written.
    lol
    12 Mar 2014, 09:58 PM Reply Like
  • Tron1999
    , contributor
    Comments (3) | Send Message
     
    Why do people call King "social gaming"? There is nothing social about CandyCrush--it is a single player game that might hook into your facebook to spam other users. How many multi-player games does king have? Zero.
    At least Zynga has true social games with their "...with friends" line.
    Also, all of King's games are just re-hashes of the "match 3 objects" genre.
    13 Mar 2014, 03:08 AM Reply Like
  • omegabonobo
    , contributor
    Comments (175) | Send Message
     
    Ridiculous valuation... Looking forward to see Gluu getting to the standard of that bubbly market.
    13 Mar 2014, 12:37 PM Reply Like
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