Will Candy Crush Maker King's IPO Be the Next Zynga?

Like it or not, social game maker King shares some alarming qualities with Zynga.

Mar 3, 2014 at 8:00PM

As far as IPO failures go, few have were as hyped -- and also as spectacularly unsuccessful -- for the average investor as social game maker Zynga's (NASDAQ:ZNGA) debacle of an IPO in late 2011.

Banking off the newfound investor enthusiasm for anything even loosely associated with the then-buzzwords de jour "mobile" or "social," Zynga was able to tap public markets at valuations diplomatically described as "generous." Things went well at first, and Zynga's shares rose quickly, hitting an all-time high slightly under $15 per share in the spring of 2012. A mere seven months later, Zynga shares were trading hands at a mere $2.12. 

And although Zynga's stock has rebounded nicely from its all-time lows recently, it's shares still sit significantly below their IPO levels. I'll let you draw your own conclusions.

Is history about to repeat itself?
Taking a leaf out of Zynga's playbook, social game maker King Digital Entertainment recently filed an S-1 in hopes of going public. 

For those unfamiliar with King, it's the maker behind the spectacularly popular Candy Crush Saga. And as a result, the company is also spectacularly reliant on Candy Crush as the primary driver of its financial results. Overall, the social gaming model hasn't proven to be an enormously consistent business model. So why should King make it a public debut?

In the video below, tech and telecom analyst Andrew Tonner examines some of the particulars of King's coming IPO, and why he thinks investors should look at King through an extremely skeptical viewpoint.

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Andrew Tonner has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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