More Kabam employees sell stock

The San Francisco game maker for the second time has allowed employees to sell their stock. Kabam says it did not raise any money for itself.

Ian Sherr Contributor and Former Editor at Large / News

Ian Sherr (he/him/his) grew up in the San Francisco Bay Area, so he's always had a connection to the tech world. As an editor at large at CNET, he wrote about Apple, Microsoft, VR, video games and internet troubles. Aside from writing, he tinkers with tech at home, is a longtime fencer -- the kind with swords -- and began woodworking during the pandemic.

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Ian Sherr

Dec. 10, 2014 4:30 a.m. PT

2 min read

Kabam is known for games like The Hobbit: Kingdoms of Middle-earth. Kabam

If this were a game, it could be called "Cash Out."

Kabam, the San Francisco video game maker best known for games such as Kingdoms of Camelot and Creature Academy, said employees and early investors were allowed to sell more than $40 million of stock for the second time in the past year and a half.

The privately held company, which has weighed an initial public offering for the past couple years, didn't rake in any proceeds. Kabam is currently valued at more than $1 billion and remains profitable.

"Investors and strategic partners want to be a part of Kabam," said Kabam's CEO Kevin Chou in a statement.

Typically, stock sales by employees are tightly controlled until a company's IPO, in part to keep the number of investors low and avoid regulatory hassles. In the past few years, as companies have delayed going public for longer and longer ( Facebook took eight years), employees eager to make money off their time at a startup have gone to " secondary markets" to sell their shares.

The video game maker said the stock sale will "reward" employees without having to go public.

Not everyone supports this behavior. Ben Horowitz, a prominent Silicon Valley venture capitalist, told The Wall Street Journal in 2011 that these largely unregulated markets operate without much information about the companies and artificially inflate some valuations. Investors, he said at the time, "Only know the product and, a lot of times, they don't even know how many shares the company has...so they don't know the percentage of the company that they buy."

Indeed, Kabam said avoiding an IPO has allowed it to invest more heavily, and without the scrutiny that comes from public markets, securities filings and quarterly earnings announcements.

Kabam is one of the few larger video game makers left that hasn't gone public. Zynga, an Internet cousin whose games like FarmVille and Words With Friends made it a household name, faced heightened criticism after it went public in 2011. Kabam's Chou acknowledged how Zynga's struggles could affect his company's eventual IPO, telling The Wall Street Journal in 2012 he would distinguish his company by focusing on how it's adjusted to changing market dynamics faster than Zynga did.

That sell has become even harder following the March IPO of King.com, maker of the addictive puzzle game Candy Crush Saga. Its stock halved over the course of this year, though it has rebounded somewhat. Still, the company said profits fell nearly 40 percent in the three months ended September 30.

Meanwhile, Kabam got a vote of confidence in July from Alibaba, one of China's largest Internet companies, which agreed to buy a roughly 10 percent stake in the company for $120 million. The companies also struck a deal to publish 10 games in China.