The social media exchange traded fund is strengthening Tuesday after King Digital Entertainment, a developer of popular Facebook and Smartphone games, files for an initial public offering.
The Global X Social Media Index ETF (NasdaqGS: SOCL) was up 2.3% Tuesday. SOCL is 2.6% higher year-to-date and has gained 51.0% over the past year.
King Digital Entertainment, the creator of widely known games like Candy Crush Saga, Pet Rescue Saga and Farm Heroes Saga, has filed for an IPO after announcing huge growth in revenues, the New York Times reports.
While the company is not strapped for cash, the social game maker could be raising capital for acquisition purposes.
Investors and analysts, though, are concerned that these types of companies will not be able to craft new popular gaming hits – King has revealed that its top three games made up 95% of total gross bookings.
“These companies are reliant on hits,” Mark Little, a tech analyst at the research firm Ovum, said in the NYT article. “Social gaming hasn’t been in the mainstream long enough to know how users will respond to new games that are brought to the market.”
Nevertheless, King’s games have been more profitable last year, with revenue of $1.9 billion in 2013, Reuters reports. In comparison, Zynga (NasdaqGS: ZNGA), the company behind popular Facebook games like Farmville, generated $900 million in revenues last year.