IPO of King – valuation level?

Next interesting IPO for the market that i observe will be King. While trying to figure out where the valuation should be, we could bench mark it to resent partial private acquisition of  an other game producer Supercell.

Supercell owners got 1.53 Mrd for 51% share of the company, which gives valuation of 3Mrd for whole company. One could argue this to be major stake of the company as shares purchased were over 50%, but there were additional shareholder agreements which gave some balancing power for entrepreneurs in decision making. So lets just assume 3Mrd as fair value without any extra attached due to over 50% ownership.

When comparing to revenue of $892 million multiple is 3.36 times. Comparison to EBITDA of $464 million lead us to multiple of 6.47.

King has according to Reuters revenue of $1.9Mrd with similar multiples as Supercell we get 6.4Mrd. With $825 million EBITDA and multiple from Supercell we reach $5.3Mrd valuation. Current proposed rate of $21-24 per share leads to valuation of 7.6Mrd.

Well it is always up to markets to decide, but once again it seem a bit high to me. Like 20 to 40% over rated. Following this one with interest as I don’t know how long and steady revenue streams we should expect from game companies like this.