King Digital Entertainment PLC (NYSE:KING), the maker of the popular mobile game Candy Crush Saga is trading back towards its initial public offering (IPO) price at $22.50 per share.
King Digital Entertainment PLC (NYSE:KING) seemed able to convince some investors that it can repeat the success of Candy Crush Saga with its new sequel. The shares of the company opened at $21 per share today. The stock declined more than 3% to $20.07 per share at the time of this writing around 11:26 A.M in New York—still close to its IPO price.
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King Digital’s proven formula
Sebastian Knutsson, the co-founder and creative chief of King Digital Entertainment PLC (NYSE:KING) said the company has a proven formula that helps them determine whether a game is a success or failure.
According to Knutsson, their proven formula is to develop a simple game fast and distribute it to players globally. The quick distribution allows them to determine if the game is a hit or duds. Duds fail fast and fail cheap, according to the company.
Candy Crush Soda Saga
The mobile games developer is currently releasing its new sequel, Candy Crush Soda Saga in certain markets, and scheduled to be launched worldwide in the fall.
Observers in the gaming industry opined that Candy Crush Soda Saga will serve as a test to the product development strategy of Knutsson. It is also the first game released by King Digital Entertainment PLC (NYSE:KING) to be closely evaluated by investors.
The mobile games developer generated 80% of its gross bookings from Candy Crush Saga last year. It is still one of the highest-grossing mobile games, but its popularity already peaked.
Candy Crush Soda Saga is similar to the original title, but it offers improved graphics and provides a new way for players to spend money. Knutsson said, “We really tried to fine tune the game we have and add new approaches.” He added, “If one team tries something and it works, we want to repeat that quickly across other titles. Likewise, if we try something and it fails, the team must share that knowledge quickly and not bury that.”
The IPO of King Digital Entertainment PLC (NYSE:KING) was disappointing and was considered the second worst performer as the stock price declined as much as 16%. In fact the, the stock declined to as low as $15.26 per share, but managed to gain more than 10% over the past three months.
Other games help boost sentiment for King Digital
The other games of King Digital Entertainment PLC (NYSE:KING) such as the Pet Rescue Saga and Farm Heroes Saga are also popular. Both games help boost the sentiment for the company.
Investors are worried that it might suffer the same faith endured by Zynga Inc (NASDAQ:ZNGA) and Rovio Entertainment Ltd, the maker of FarmVille and Angry Birds, respectively that it is hard to develop new hit game.
They want to see if King Digital Entertainment PLC (NYSE:KING) would be able to repeat the success of the Candy Crush Saga and generate revenue from other popular games.