Rovio, the Finnish game developer behind "Angry Birds," today announced plans for an initial public offering in its home country that reportedly values the company at $2 billion.
Attracting investors, though, may prove a challenge for many reasons. For one thing, Wall Street has soured on the mobile gaming sector given the disappointing share-price performance of Rovio's rivals. For instance, Zynga (ZNGA), best known for "Words With Friends," currently trades at less than half of its 2011 IPO price of $10. Five years ago, Rovio rebuffed an unsolicited $2.3 billion takeover offer from Zynga, according to Bloomberg.
Activision Blizzard (ACTI) acquired Candy Crush parent King Digital for $5.9 billion in 2015, about 20 percent lower than its IPO valuation less than two years earlier. Another developer, Glu Mobile (GLUU), recently announced a restructuring that will result in the elimination of 46 jobs. The San Francisco-based company traded at $11.50 in its 2007 IPO, but its shares closed on Tuesday at $3.43.
Rovio has reported that the company's largest shareholder, Trema International Holdings, and others have been selling its shares. Rovio Chairman and co-founder Kaj Hed -- who's also the father of CEO Mikael Hed and the uncle of Chief Operating Officer Niklas Hed (also a co-founder) -- controls Trema. Investors tend to view the unexpected sale of shares by insiders negatively, particularly ahead of a public offering.
Furthermore, Rovio's deal is worth only about 30 million euro ($36 million), tiny by Wall Street's standards, particularly for a company with a value estimated at $2 billion. Owning a stake that small in a company valued that high would make it difficult for an outside investor to have much influence. Also, since Rovio's shares will be listed only in Finland, many U.S. investors probably won't bother with them.
Rovio said listing its stock in Finland makes sense because that's where the company is headquartered and where most of its employees are located. Furthermore, Rovio argues that its IPO would support the Nordic region "as an international mobile game hub and as well as the development of the Finnish mobile game industry," said Rovio spokesman Rauno Heinonen.
The company's listing decision, however, surprised veteran tech analyst Gene Munster of Loop Ventures, who described it a "slap in the face to the Nasdaq."
Indeed, Kathleen Smith, principal at Renaissance Capital who oversees two exchange-traded funds, argued that listing in Finland was as much of an economic decision as a patriotic one. She added: "Investors here will not a give a premium price to this company."