During its widely anticipated and closely watched IPO, the maker of the smartphone game Candy Crush Saga, King Digital Entertainment, saw its stock drop 13 percent from the initial offer price after trading on Wednesday afternoon.
Shares fell from $22.50 to a low of $19.08, according to the New York Post
. The company's valuation emerged at roughly $6 billion after selling 22.2 million shares and raising $500 million. JPMorgan Chase, Credit Suisse, and Bank of America Merrill Lynch were the lead underwriters for the offering.
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Many interpret the drop as concern for King Digital's business model. Despite that there are 93 million daily active users for its flagship game Candy Crush Saga, many investors are concerned because the company's $1.9 billion in annual revenue does not come from diversified sources.
The company offers roughly 180 games, but makes three-quarters of its revenue from Candy Crush.
"King Digital is putting all its energy into finding the next game that can leave the company less reliant on cash-generator Candy Crush," Peter Garnry at Saxo Bank said in a report, according to CNN
. "Given what we have seen with other mobile games' trajectory in engagement, time is not King Digital's best friend."
"With King Digital, there is a lot of concern about its ability to keep coming up with popular games," Jay Ritter, a professor and IPO expert at the University of Florida, told the Post. "The offer price was set at the middle of the filed price range, indicating that there was neither exceptionally strong nor exceptionally weak demand."
Candy Crush Saga and many other games by King Digital are free to download. The company's main source of revenue comes from users purchasing extra lives in the games.
King Digital has continually been compared to competitor Zynga, the company that developed the massively successful Facebook game Farmville. Zynga's stock currently trades for less than half of what it did upon its public debut in 2011.
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