Candycrush IPO: Too much too soon?

Screen Shot 2014-07-19 at 1.07.25 AMJust until yesterday, the King Digital Entertainment Candy Crush IPO priced at $22.50 was the talk of the town. Even though there were concerns as voiced by EEDAR vice president of insights Jesse Divinch “Much like the social-gaming sector, the mobile market can be just a volatile. Success with one game — or even a few — doesn’t mean it is sustainable long-term, as we’ve seen with Zynga.”

Today, within the first day of trading, the shares fell by -15.56%. Why is this important?

Lets consider some points:

On page 54 of the disclosure made by King Digital Entertainment  (KING) to US Securities and Exchange Commission is a disclosure stating that “Gross bookings in the quarter ended December 31, 2013 slightly declined compared to the quarter ended September 30, 2013. The decline was driven by a decrease in Candy Crush Saga gross bookings, which was mostly offset by an increase in gross bookings across all of our other games.” (Jim Edwards) Essentially it implies that the usage of the game is down.

Then there is the fact that KING is almost entirely dependent of Candy Crush for its user base. Once users lose interest they will start moving on.

There is historical data from google search indicative of the fact that popular games like  Farmville, Angry Birds, and Candy Crush have reached a peak but interest has eventually dwindled down.

 

Given all of the above, there is a concern whether we are actually entering the start of the end of the tech bubble, how ever it is too early to assume that the concern is in fact true.

 

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