Last-minute jitters among investors led game developer King to price its US initial public offering at the midpoint of its range, as the company behind the blockbuster Candy Crush Saga faced concerns over its ability to repeat the app’s success.
London-based King raised $500m from the IPO late on Tuesday, valuing the company’s equity at $8bn on a fully diluted basis and making it one of the most valuable European technology companies to go public in years. It said that two-thirds of the funds raised would be used for “general corporate purposes” including acquisitions, while the remainder would go to investors selling down their holdings.
Its flotation on the New York Stock Exchange will bolster the fortunes of its biggest backer, Apax Partners, which owned 48 per cent of its shares before the IPO.
People close to the offering said it was about seven times subscribed, but at least one investor said that underlying interest for King’s shares was significantly less.
King is the latest global technology company to go public in the US, but the move comes amid growing debate among investors over the high valuations that start-ups are fetching.
“I don’t think investors are viewing this IPO with a lot of conviction. Many see this still as a ‘show-me’ story. It’s one of those names you don’t want to put your neck on the line for,” said one portfolio manager at a large hedge fund.
King, founded in Sweden in 2002, sold 22.2m shares for $22.50, the midpoint of a $21 to $24 range set out by the company’s executives before they criss-crossed the Atlantic to meet investors over the past two weeks.
Some fund managers are eager for a way to tap the fast-growing mobile apps market, from which King derives almost three quarters of its income. Its revenues leapt from $164m in 2012 to $1.9bn in 2013, largely due to the popularity of Candy Crush.
In private meetings investors questioned Riccardo Zacconi, the 46-year-old chief executive whose 10 per cent stake in the company is now worth $800m, over why they should buy into the pitch that its fate would differ to Zynga’s, the digital game maker whose shares have fallen sharply since its IPO in December 2011.