With King Digital shares plunging as much as 33% since their debut, Toby Green looks at the future of gaming flotations
With the CNBC set on one side and blue-coated traders rushing around, the floor of the New York Stock Exchange is used to being a hive of activity. But when King Digital floated back in March, the London tech firm – which is domiciled in Ireland – managed to find a way to grab the attention of the NYSE's workers. To celebrate the start of trading after raising $500m (£300m), it decided to bring along a number of poor souls dressed as characters from its hit Candy Crush Saga game, as well as some of its other, less well-known titles.
The result? The rather surreal sight of a carrot helping to ring the opening bell, and hard-bitten Manhattan traders high-fiving boiled sweets.
Well, there's not much high-fiving going on at King at the moment. Last Tuesday night it announced figures for the second-quarter revealing gross bookings – ie how much users spend in-game while playing – had dropped nearly $30m (£18m) from the previous three months to $611.1m (£365m).
The problem? Candy Crush – the title that has been labelled the crack cocaine of smartphone games, and which accounts for roughly 60% of King's total revenues – had "declined more than we had expected", according to chief executive Riccardo Zacconi, and its other titles hadn't stepped up to make the difference.
Who could have seen this coming? Quite a lot of people, to be honest. There was no shortage of warnings that King was floating on the basis of one hit game, and that this game wasn't enough to justify a valuation of $6bn (£3.6bn).
There was also the obvious comparison to be made with fellow games developer Zynga, which launched its own $7bn (£4.2bn) float at the end of 2011 off the back of the success of FarmVille and Words with Friends (remember those?) but currently trades at less than 30% of that.
For its part, King claims it has a formula to follow up Candy Crush with other hits, pointing out that other games contributed 41% of gross bookings in the second quarter, up from 33% in the previous three months.
Whether you believe that's enough depends partly on whether you think creating a hit game is an art or a science.
Candy Crush certainly is a perfectly formulated exercise in keeping you playing and, most importantly, persuading you that a small financial outlay in-game is worth it.
But, as the results show, there is only so long you can keep people playing the same game, no matter how much you tweak it, and there is no obvious successor.
The market is certainly showing what it thinks. King's five months on the stock exchange has already had their fair share of drama, with the shares dropping more than 15% on their debut before last month moving – albeit briefly – above the $22.5 (£13.5) float price for the first time.
That seems a long while ago now. On Wednesday the shares fell by as much as a quarter, touching new all-time lows during trading by dropping below $14 (£8.4).
Whether King can bounce back depends on what it can pull out of the hat, but there are some worrying implications for the UK tech scene.
Generally accepted wisdom is that investors in the UK don't "get" tech in the way that the Americans do, which is why so many of our entrepreneurs in the sector head across the Atlantic.
There are some signs that this is changing, but only some. For those in the UK who worry about a tech bubble, King's slump will serve as a vindication of their caution.
That's unfair. Look at the less headline-grabbing, but rather more consistent, performance of Markit. Like King, the financial data giant created in a Hertfordshire barn chose Wall Street rather than the City for its listing.
The $4.28bn (£2.6bn) June float saw its shares debut at $24 (£14.3), and they have never dipped below that (it's currently trading a bit above $25 (£15) and its valuation is now above King's.
The hope for the UK has to be that it will not be too long until these types of companies feel confident about, and inspire confidence in, investors here.
Let's hope King's crash doesn't signal game over for that ambition.