I think so. I got an article which crossed my desk this morning:
King Digital Entertainment (makers of the Candy Crush Saga mobile game) is planning to launch an IPO valuing $7.56 billion, which is worth more than 15 percent of S&P 500 companies. Each of King's 22.2 million shares would be priced between $21 and $24, and is expected to debut the trading on March 26. Fox Business reports King would command a market value worth more than other major tech companies like AOL, Lions Gate Entertainment and even 2.8 times more than struggling J.C. Penny. Last month, King revealed that its fourth quarter revenue hit $602 million, and $159 million in profits.
It's cheap at the price - roughly a one to one price to (annualized) earnings ratio. However, this is a gaming company, and gaming companies are notorious for their price fluctuations. Very few companies which make standard XBox or Playstation games have remained at reasonable price levels, the competition is fierce and consumer tastes are fickle. Less standard gaming companies, such as Zynga (based almost entirely on Facebook registrations) have suffered mightily after going public.
King Digital has been very profitable, but I've had experience with firms like this. Typically, when they are privately held, they are fast, nimble, and aggressive. When they cash out, they become bloated, lazy and unresponsive. Can they break the mold? Since it's my view the market is artificially overpriced, my guess is this is a stock that will jump quickly and far early in its trading life, and then slip back down as reality hits home.
I can't blame the stakeholders for wanting to cash out, and perhaps this is the best time for them to take what they can get.
On the other hand, maybe investing in really useful stuff like this might be a better option.
