Remember when playing games involved holding a lime green Gameboy, with a so called colour screen? Putting in the Pokémon game card thing and playing until the batteries ran out? They were good times. I will still say to this day, that when Santa bought me that Gameboy and Pokémon gold, it was the best Christmas ever.
With Christmas rolling around again, fairly quickly I want to look towards the next big game that could make me happy. Truth be told, I am not a gamer, now I am slightly older and am all about chasing money. But there is a company about to list on the ASX, which could use a favourite past time of gaming to make me money. While it sounds like a Christmas miracle, it is actually called iCandy.
While not a big fan of the name, I do like the company. They make mobile games in the ‘freemium’ space that is it is free to download, free to play but offer in app purchases for those that become addicted. Another earner for this industry is the in app advertising, which presents significant opportunity given the target nature of the content. The company collectively has 10 million game downloads worldwide and is already creating revenue.
The key risk here is the concentration of ownership. With just over 206m shares on offer (at $0.20) the maximum number of shares issued will equate to around 9.8% of the company. The rest is owned by majority shareholders. A company by the name of Fatfish Internet Group Limited will own the bulk of the remaining shares in the company on completion of the offer. This throws up liquidity risk and puts a lot of voting power in a company which we know little about.
It is expected that a large portion of shares will be classified by the ASX as restricted securities, and placed into escrow. Following the escrow period there is potential for shares to flood the market having a detrimental effect on the share market.
The float is aiming to raise between 2.86m and 3.86m to invest in marketing of the games, development of new and existing games and technology, as well as fund administration costs and payback debt.
The company is looking to ‘localise’ its operations in Asia, including Japan and China. From a future growth perspective this makes sense. Think about how many mobile devices will exist in this region, and the corresponding number of potential downloads. The opportunity is huge. Companies are going to want to advertise to this market, and the growing middle class will see more disposable income for activities including in app purchases.
With a portfolio of existing games and an experienced executive team, it is fair to assume this company can grow and create new and exciting content for the world to download. You can see the value here being that they will get to know each consumer very well, a single account and monitoring usage patterns, purchase cycles and other recorded interests. This information will steer new application development, but also present value to marketers, who are already diverting advertising spend from traditional print and TV to digital and mobile marketing.
With not long to listing this one where I will wait to see what happens on opening day. Short term history suggests that IPO listings tend not to fare well on opening day given the current volatile market. However with a technology company on offer, Asia wide presence this could get a few Australian investors hot under the collar. Successful technology companies are few and far between on the ASX.