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King Stumbles Out Of the Gate

By Evan Niu, CFA and Erin Kennedy - Mar 28, 2014 at 8:00PM

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King finally goes public, but immediately pulls back once shares begin trading publicly. Is freemium gaming overrated?

This week, King ( KING.DL ), maker of the smash hit mobile game Candy Crush Saga, went public at $22.50 per share. This was a widely anticipated IPO, yet shares immediately pulled back. Investors have been concerned at how heavily dependent the company is on its one single hit, with its second and third top performers falling way behind the success of Candy Crush, despite all being very similar variations of the same game.

Investors have also been concerned about King's "freemium" business model, where gamers play for free, and then buy in-app purchases. Comparisons to Zynga ( ZNGA 5.89% ) were unavoidable, as the company also went public after the success of a freemium model game, and then performed poorly as a stock after its IPO.

In this segment from Friday's Tech Teardown, host Erin Kennedy and Motley Fool tech and telecom bureau chief Evan Niu discuss the mobile gaming business and how difficult it can be for a company to create a second blockbuster despite the massive success of its first. Evan also discusses the major risks investors in King face today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Zynga Inc. Stock Quote
Zynga Inc.
ZNGA
$6.11 (5.89%) $0.34
King Digital Entertainment plc Stock Quote
King Digital Entertainment plc
KING.DL

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