5 Things to Know About the 'Candy Crush Saga' IPO

Candy Crush Game Maker King Announces IPO to List in New York
Bloomberg/Andrew Harrer

There has never been a hotter mobile game than "Candy Crush Saga," and the company behind the addictive blockbuster game believes it could raise nearly $613 million in an initial public offering, according to a regulatory filing.

King Digital Entertainment said it plans to sell 15.3 million shares in the offering, while existing shareholders will sell an additional 6.7 million shares, The Associated Press reported Wednesday.

Shares are expected to be priced between $21 and $24, for a total of between $466.2 million and $532.8 million. Underwriters have the option of buying up to an additional 3.3 million shares. That could raise an additional $69.9 million to $79.9 million.

The Irish company announced its plans to go public on the New York Stock Exchange in a filing last month. The move provided a glimpse of the state of the King Digital's financial health, and insight into know how wildly popular that "Candy Crush" has become. Let's go over a few things from King's SEC filing that you may not have known before.

1. 'Candy Crush Saga' is Even More Popular Than You Think

You've seen plenty of people try to line up colored pieces and achieve different goals as they get through hundreds of challenging levels. The beauty of "Candy Crush Saga" -- as one will find with any popular casual or social mobile game -- is that it engages players with brief bursts of diversion. A game can last just a few minutes, though the increasing levels of complexity make it difficult to let go.

King's filing shows that the game is drawing 93 million daily active users, and they are playing 1.085 billion games a day. The average player is diving into nearly a dozen games a day.

2. King Is a One-Trick Pony

Mobile gaming companies like Zynga (ZNGA), Glu Mobile (GLUU), and King, put out (or acquire) a wide variety of diversions and hope that something sticks. Zynga has had successes with "FarmVille," "Words With Friends" and "Draw Something," but King has only one true franchise under its belt.

King's second most popular game is "Pet Rescue Saga," but it attracts just 15 million daily active gamers who play an average of less than nine games a day. The next three most-popular apps draw a combined 16 million daily active gamers, and they are even less engaged than those playing "Pet Rescue Saga."

3. Advertising Isn't Part of King's Game

King's inability to score a second hit is even more frustrating because it doesn't rely on ads for revenue the way that other gaming companies have in the past. %VIRTUAL-article-sponsoredlinks%Ad accounted for 10 percent of its revenue in 2012 and just 1 percent last year when King decided to stop selling them.

As any of the millions of people playing "Candy Crush Saga" will tell you, King generates revenue from the game by selling virtual items that can enhance gameplay or help players advance to new levels. "Candy Crush Saga" now fills the screen space formerly dedicated to outside ads with "house ads" promoting its other games, but apparently players aren't being wooed by the rest of King's portfolio.

4. King Is Already Bigger than Zynga

Zynga's annual gross bookings peaked at $1.15 billion before falling to $716 million in 2013. New games and acquisitions haven't helped, and that was for a company that had many hit franchises under its belt. King has already surpassed Zynga's overall success, scoring nearly $2 billion in gross bookings last year. However, the bigger they are, the harder they fall.

5. King May Have Peaked Too Soon

Zynga went public in 2011 while it was still growing. The same may not be the case for King. In its SEC filing, King revealed that revenue, gross bookings, profit, adjusted earnings before interest, taxes, depreciation and amortization -- known as EBITDA -- and monthly unique payers all declined from the third quarter of 2013 to the fourth quarter. There is some degree of seasonality in mobile gaming, but these sequential dips didn't happen at King a year earlier.

It's too soon to say for sure that the popularity of "Candy Crush Saga" peaked last summer. Nor should we count out King's potential ability to whip up another hit. However, that cloud will be looming over its IPO when it hits the market in a few weeks. If you're going to play this investment game, keep a close eye on your candy.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Company Behind 'Candy Crush' Files For IPO
Company Behind 'Candy Crush' Files For IPO
Originally published