Mobile game maker King Digital Entertainment Plc priced its initial public offering on Tuesday at the mid-point of its expected range, valuing the "Candy Crush Saga" maker at about US$7.1 billion (S$9 billion) despite questions about whether it can replicate the success of its smartphone smash-hit.
The offering marks the largest United States IPO from a booming mobile gaming industry that has been keen to emerge from the shadow of Zynga Inc, the social gaming firm that lost half its value after a 2011 IPO that valued it just below King at US$7 billion.
London-based King priced its IPO at US$22.50 per share, with the stock to debut on the New York Stock Exchange on Wednesday. Its offering of 22.2 million shares would raise about US$500 million at that price.
"It's fair to say that if it was a very high-demand IPO, we would've seen the price at the upper end of the range," Sterne Agee analyst Arvind Bhatia said. "At the mid-point, it's a successful IPO but perhaps not a runaway success."
Even if King, whose other games include "Bubble Witch Saga" and "Papa Pear Saga", pulls off a strong debut, the real test will be the stock's staying power in coming weeks and months. King hopes to avoid Zynga's fate by virtue of a stronger focus on a mobile gaming market worth an estimated US$17 billion.
"What's more important than the price is how it trades tomorrow and in coming sessions," Bhatia said. "If the investors are in because they expect a quick profit and it doesn't happen because it doesn't get a lift, people will exit quickly."
Founded in Sweden in 2003, the company has drawn plaudits for transforming "Candy Crush Saga" into a household name that was the most downloaded and top-grossing free app of 2013 on Apple Inc's app store.
King, formerly known as "King.com", was saved from bankruptcy only by a last-minute infusion of investor capital on Christmas Eve in 2003 and survived to eventually turn a profit in 2005 and every year since.
But it relies on its marquee game for over three-quarters of its revenue - a red flag for investors. They warn of the dangers of an industry where games like "Draw Something", a one-time hit from Zynga's OMGPop studio that was shut down a year ago, can top the charts and then quickly fizzle.
The stock's debut on the Big Board on Wednesday, under the ticker "KING", will be closely watched by youthful rivals like San Francisco-based Kabam and Kixeye - known for strategy games like "Kingdoms of Camelot" and "War Commander" - which are expected to seek market listings or new financing.
King sold 15.5 million shares in the offering. The rest is being offered by selling stockholders, including Apax Ventures.
Apax is the company's largest shareholder and will retain a 44.2 per cent stake in the company, if underwriters fully exercise their option to buy shares.
Riccardo Zacconi, who has led King since co-founding the company, will hold a 9.5 per cent stake in King after the IPO.
JP Morgan, Credit Suisse and BofA Merrill Lynch acted as lead underwriters for the offering.