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Candy Crushin’ All the Way to the Bank

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Today King Digital Entertainment Plc, the video game company that makes the addictive game Candy Crush, and not much else, goes public. (The symbol is KING, for all you stock-watchers.) “At the top of the price range, King would be valued at $7.6 billion, or about 2.9 times projected sales this year,” according to Bloomberg.

$7.6 billion, for a time-wastey little smart phone game? In the current issue of The Baffler, Ian Bogost describes the Candy Crush swindle, which he says is just a new take on a classic racket:

The early levels are a cinch, but King has carefully designed each subsequent level to become increasingly demanding. When you fail, you lose a life, arcade-style, and losing all your lives ends the game—the emotional equivalent of seeing your last dollar disappear down the gullet of a Vegas slot machine. To continue after death, you can wait a half-hour for a new life to regenerate, pester a Facebook friend to play the game (in which case you receive a new life), or buy one as an impulse purchase. Meanwhile, you can always purchase special upgrades that assist in the completion of a level. The results are remarkable, from a business perspective. Reports suggest that King makes between $500k and $850k per day from Candy Crush. [. . .]

As I write this, King, the developer of Candy Crush, is reportedly planning a $5 billion IPO, making assurances along the way that it won’t fall into the same chasm Zynga did after going public (mostly by virtue, it seems, of simply not being Zynga). Meanwhile, King is taking advantage of new, confidential IPO filing rules that let it hide business data it would have previously had to disclose—the same sorts of off-the-books dealings that allow tech insiders to operate surreptitiously before regulators notice. Like Wall Street, Silicon Valley is already a kind of mafia.

So, how’s it looking for King now? The headline of the Bloomberg piece does include the words “One-Hit Wonder Worry.” On the other hand, if that hit is a brilliant swindle, maybe one hit is all you need. After all, as Bogost details in his piece, Zynga’s executives made out okay from their IPO. Sure, their prize product is now a punchline, but they’re laughing all the way to the bank:

When Zynga went public in late 2011, it failed to exhibit the rocket-ship liftoff that Wall Street had come to expect from hot tech company IPOs. Zynga shares rose from their $10 initial offering price to a high of $14.69 in March 2012 before falling hard. During 2013, the stock languished between $2 and $5 per share. The company shuttered studios and laid off workers, but for at least one central group of players with (financial) skin in the game, matters of market performance didn’t matter all that much. Thanks to the top-heavy equity structure of the venture-capital model of capital formation, FarmVille’s early investors, directors, and executives had taken advantage of secondary-market sales and new venture investment to cash out part of their positions long before the company had to disclose its financials to the SEC and the public. Even after the IPO, Zynga insiders sold off hundreds of millions of dollars in a secondary offering unavailable to the company’s employees, many of whom had been granted options and stock grant incentives as part of standard Silicon Valley operating procedure. Required SEC disclosures reveal that then-CEO Pincus cleared $200 million alone through this secondary offering.

Read Bogost’s full essay, “Rage Against the Machines,” here.