Candy Crush maker King has rough IPO day

The company's shares head down 10 percent from their opening price on Wednesday, and are showing no signs of making a comeback.

King Digital Entertainment
King, the digital-entertainment company behind the wildly popular Candy Crush franchise, has had an inauspicious start on the New York Stock Exchange.

The company, which trades under the ticker symbol "KING" went public on Wednesday for $22.50. Before long, the company's shares plummeted to below $20 and eventually hit a low of $19.08. As of this writing, King's shares are down 10 percent to $20.25.

King has grown into a massive force in the digital-gaming space, due in large part to the Candy Crush franchise. At the end of 2012, the company's revenue was just $164.4 million. By the end of 2013, that figure jumped to $1.9 billion. King's profit also exploded in 2013, growing to $567.6 million.

Still, Wall Street doesn't seem convinced that King has what it takes to be a solid long-term investment. Although the company has nearly 200 game franchises, Candy Crush has been its only true breakout hit and represents approximately three-quarters of its revenue -- a red flag for some investors.

King might also fall victim to the Zynga effect. The FarmVille creator went public in 2011 and initially was well-received by investors. After its games started to lose their popularity, however, and Zynga failed to adapt to the mobile market, the company's market cap plummeted and its value to investors declined. As of this writing, Zynga is valued at just $4 billion -- nearly half its IPO valuation.

But King has its strong points for investors. The company carries no debt on its balance sheet and had boatloads of cash on hand even before the IPO. Whether it'll be able to overcome investor fears and change its luck on Wall Street will be its next test.

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