King IPO will disappoint (Znga looks extremely risky here)
In fact I think King will close in the mid to low teens, since who really wants to invest there hard earned money into a company that only has one game that makes money. And Candy Crush is losing customers as we type. The big question is when King IPO flops how does Znga react? Does Znga trade lower on news that King was all "hype" or does Znga move higher on a weak King offering. Best to sell you Zynga shares in AH since we sure don't want to be long Zynga if King Entertainment opens and closes WEAK.
I *BELIVE* ZNGA goes lower. It doesn't have the revenues KING has etc. However I'm sticking with ZNGA for the long term because I believe they are making a turnaround in mobile. I bought in high in the upper $5 range so I have to go with my gut feeling on the turnaround. Any thoughts out there?
I agree with all of your excellent premises and logic. However, on the opening day of an IPO, even an IPO as plainly absurd as King World, insanity and greed can run to great extremes. Do not overlook it is also in the underwriters' best interests to have what is viewed as a successful launch, and they will push and shove their garbage. In my view, all bets are off on tomorrow's IPO one way or another. It is too risky to attempt to predict the madding crowd with any degree of probability.
Summary: Wait for the dust to settle and then short King World. As you aptly point out, it is a one hit wonder. ZNGA will respond accordingly up or down, but longer term, all that really matters, they are both inflated hype.