Candy Crush Maker King Digital Recovers From IPO Hangover

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Source: Thinkstock

Source: Thinkstock

King Digital Entertainment (NYSE:KING), maker of the popular mobile game Candy Crush, didn’t quite hit the ground running when it launched its initial public offering on March 26. Shares opened for trading on the New York Stock exchange at $20.50, down about 8.9 percent from an IPO price of $22.50 per share, and closed the day at $19. In the five trading days since, shares fell as low as $17.62 before recovering to about $19.50 on Tuesday afternoon.

Much of that recovery took place on Tuesday, when Mr. Market apparently decided to buy on the dip. Shares jumped as much as 8.6 percent on the back of no significant news. The mini-rally did, however, stoke concerns that there’s a bubble inflating beneath technology and Internet stocks like King Digital. Although King Digital itself has so far avoided an outsized valuation, the IPO market in general is pretty frenetic as investors stretch their risk tolerance in the search for yield.

Twitter’s (NYSE:TWTR) IPO has pretty much become a symbol for the frothiness in the market. Shares of the social platform hit the market at what many already considered an over-inflated price before skyrocketing even higher. The stock has since cooled down some, but it’s still hot with speculation and hype.

King Digital is no Twitter, but it occupies a similar niche in the spectrum of investments. It is relatively small, new company; it anticipates rapid growth; it threatens to disrupt and lead a market; and it deals with mobile tech and social media, which are like the Wild West right now — basically, it’s a siren. King Digital, like Twitter and any number of tech and Internet IPOs over the past few years, is tempting investors into the rocks with the promise of outsized returns.

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