The Exchange

Tech IPOs more bumble than bubble ahead of King's deal

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"Candy Crush Saga" creator King Digital to go public Wednesday
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King Digital Entertainment is expected to open between $21 and $24 per share when it goes public Wednesday. CEO and editor-in-chief of Business Insider Henry Blodget joins "CBS This Morning" to discuss the risks of the company going public.

Candy Crush Saga players who have shoveled buckets of money to publisher King Digital Entertainment (KING), mostly 99 cents a pop, might be able to recoup some of their expenses on Wednesday, starting at $22.50 a share.

King priced its initial public offering at $22.50, exactly the mid-point of its expected range, on Tuesday night.

The owner of the world’s most addictive mobile game got a relatively stingy valuation of around $7 billion, despite $2 billion in revenue and $568 million in actual net income last year. "One-hit wonder" is the hard-to-shake label hurting King's image. That it may have cracked the mobile gaming biz with addictive hits beyond Candy Crush seems lost on the analysts. With all the bad press, it's probably going to end up undervalued.

But, still, be careful out there, tech IPO investors. Well, except for you big mutual, hedge and pension funds. And the lucky guys and gals getting IPO allocations direct from their brokers.

The tech IPO market, nearly moribund for the first few months of the year, has heated up slightly, with a total of nine deals priced in 2014 before King. But unless you bought at the hard to grab IPO price, you’re likely underwater. All nine deals are trading below where they closed on IPO day; all but one are below the level of their very first trade on the public market, too.

So if you bought in the secondary market, you’re likely out of luck. But all are above their original IPO price, so kudos to you early entrants. And, of course, even after King, some of the biggest and most interesting deals are still ahead. Slightly profitable and fast-growing food delivery service GrubHub, cloud utility service Opower and cloud networker Aerohive Networks are expected soon. Bigger deals, like Alibaba, Box and Dropbox, remain farther off on the IPO horizon, depending on stable market conditions and continued demand for Internet plays.

Still, despite crazy Castlight Health’s (CSLT) “most overpriced IPO of the century,” these are hardly the conditions that make up a bubble. King's getting postively no respect and even last week’s three cloud-related deals were what might be called sanely overvalued IPOs that have done okay.

Amber Road (AMBR), which offers cloud services for global trade, got a first day pop of 31% and has since traded down 7%. Banking cloud services provider Q2 Holdings (QTWO) jumped 17% on day one and is since down a few percentage points. And Benefits services cloud provider Paylocity (PCTY) is just about unchanged since getting a 41% spike its first day.

But bubble hopes, or accusations, spring eternal. Maybe tomorrow?

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