Home Business King Digital vs. Facebook Inc vs. Twitter Inc: Tale Of 3 IPOs

King Digital vs. Facebook Inc vs. Twitter Inc: Tale Of 3 IPOs

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Today, King Digital Entertainment PLC (NYSE:KING), Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR) all have something in common, other than being tech stocks, of course. Wall Street’s dumping them all today. Shares of King Digital have declined nearly 13% on its debut on the New York Stock Exchange. Both Facebook and Twitter have declined more than 5%.

So looking back on each of these companies initial public offerings, which one had the best one?

IPO day performance: Facebook and King Digital

In just a single day, King Digital Entertainment PLC (NYSE:KING) has declined meaningfully from its IPO price of $22.50 a share, falling to $19.63 a share. In fact, this morning more shares of King changed hands than any component in the S&P, according to CNBC’s Carl Quintanilla.

It certainly sounds like a repeat of Facebook Inc (NASDAQ:FB), which saw its shares drop off on the very first trading day as well. The social network set its IPO price at $38 a share, although it opened at $42.05 a share as investors eagerly drove the share price up during early trading.

Similarly, King Digital Entertainment PLC (NYSE:KING) also saw some nice activity during the premarket trading period. The stock climbed to $28.50 a share before the markets opened this morning, and then it started to drop like a rock right before the markets opened. The company’s stock actually opened today at $20.50 a share—$2 below its IPO price.

Twitter drops below opening price

King Digital vs. Facebook Inc vs. Twitter Inc: Tale Of 3 IPOs

With Twitter Inc (NYSE:TWTR), we had the opposite story. The stock shot upward suddenly on opening day and, after a brief dip in late November, it skyrocketed. Investors loved Twitter, but analysts began to gradually turn bearish on the company, citing its exorbitant valuation. And it’s been all downhill from there. At this point, Twitter Inc (NYSE:TWTR) has fallen 36% from its all-time high of $74.73, which it reached on Dec. 26, according to CNBC’s Giovanny Moreano.

Twitter Inc (NYSE:TWTR)’s IPO price was $26 a share, but it actually opened at $45.10 a share. So if the metric you’re looking at is how excited investors got about the company, then Twitter certainly was the winner. The company’s stock price jumped nearly $20 a share in a matter of hours. Today at just under $45 a share, Twitter’s share price has finally dipped back below its opening price. However, it still has a long ways to go before it will even approach its IPO price.

Comparing King Digital to Zynga

Of course a better, more natural comparison to King Digital Entertainment PLC (NYSE:KING) would be Zynga Inc (NASDAQ:ZNGA). Coincidentally, Wall Street also sold off Zynga today, as shares fell 5%. A look at Zynga’s stock chart provides perhaps a better suggestion about what could happen to King Digital in the coming months. Shares of Zynga dropped initially before dramatically shooting upward in early 2012. Then they declined all the way to the $4 to $5 a share range, which is where they are now.

Zynga Inc (NASDAQ:ZNGA)’s IPO price was $10 a share, although even it only declined about 5% on its opening day, compared to King Digital Entertainment PLC (NYSE:KING)’s 13%.

What happened after Facebook’s, Twitter’s IPOs

Of course it is still far too early to say where King Digital Entertainment PLC (NYSE:KING) will go from here. It took Facebook Inc (NASDAQ:FB) about a year to recover to its IPO price and then finally its opening day price. Twitter Inc (NYSE:TWTR) has been on the market for less than five months, and its trajectory has already been completely different from that of Facebook, even though both are social networks. Some would say that Twitter has been riding high on Facebook’s success, as the social networking model was proven by Facebook. However, Twitter’s recent decline shows that high-flying stocks without any ties to fundamentals are going to fall back down to earth.

Tomorrow will certainly tell us a bit more about what King Digital Entertainment PLC (NYSE:KING)’s fate might look like over the next several months. Will it follow in the footsteps of Facebook Inc (NASDAQ:FB)? Or Twitter Inc (NYSE:TWTR)? A least for now anyway, King Digital’s IPO sounds like a nightmare—so much so that CNBC‘s Jim Cramer called it “a Stephen King horror story,” saying it could be Misery or “even Cujo.”

King Digital’s IPO is nightmarish

If you’re not familiar with either book, Cujo involves a rapid dog named Cujo, of course, which turned on its family because it became infected with rabies. Misery is about a writer whose most popular character was called Misery Chastain. After an insane fan rescues him from a car crash and learns what he’s going to do to his character in the next book, she torments him, even cutting of his thumb and his foot in an attempt to get him to rewrite the book.

So will King Digital Entertainment PLC (NYSE:KING) turn on investors through no fault of its own, rapidly attacking them? Or will it take an even more gruesome and direct path toward value destruction? Once again, it’s too early to tell, but at least for now, it looks like King Digital is the big loser in the IPOs of the foursome discussed here. But if you look at it in a different light, King Digital may deserve to be the winner. But of course deserving to win on Wall Street and actually winning on Wall Street are two different things. Sentiment is a tricky thing.

Twitter the winner, thanks to the hype

If we had to pick an IPO winner, Twitter Inc (NYSE:TWTR) might be that winner. After all, it’s only recently that the company’s stock has taken a dive, while all three of the others fell on opening day. And don’t forget about all the hype which led up to Twitter’s debut. Analysts from numerous firms were churning out positive reports about it, but we haven’t heard as much about King Digital. Of course there was plenty of hype about Facebook Inc (NASDAQ:FB) too, but investors still weren’t confident in the company, and the disaster surrounding the trading lag on the day of its debut didn’t help matters any.

So as like so much that happens on Wall Street, Twitter Inc (NYSE:TWTR) may have come out on top just because of analyst hype. After all, the company isn’t even expected to be profitable for quite some time. King Digital Entertainment PLC (NYSE:KING), on the other hand, is already profitable. The Candy Crush Saga game maker posted profits of $567.6 million last year as it watched an 11-fold increase in revenue, which climbed to almost $1.9 billion.

King Digital already turning a profit

This means King Digital Entertainment PLC (NYSE:KING) is the most profitable tech company to IPO since Facebook Inc (NASDAQ:FB), according to The Wall Street Journal. In fact, approximately 74% of companies which have had their IPO in the last six months were not profitable by the time they filed their paperwork to go public

So why did Wall Street initially love Twitter and shun King Digital Entertainment PLC (NYSE:KING)? Some investors are probably concerned that the company won’t have another hit game, which is exactly what happened to Zynga Inc (NASDAQ:ZNGA). One thing’s for sure though. The ride with King Digital is probably going to be a wild one this year.

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