Not everyone will be cashing in on King Digital Entertainment’s sweet initial public offering later this month.
At least two individuals associated with the Candy Crush-maker’s early development will be missing out on potential billions because of their decision to sell their shares for mere cents three years ago. According to King.com’s registration documents with the Securities and Exchange Commission, cofounder and former c0-CEO Toby Rowland as well as early investor and former board member Klaus Hommels each sold more than 40 million shares back to the company at a price under 8 cents a share in 2011.
With the Dublin-based company expecting shares to price the IPO as high as $24 a share, those stakes would have been potentially worth about $1 billion as calculated by PrivCo, a New York-based private company research firm.
When contacted by PrivCo regarding his decision to sell his shares in 2011, Rowland joked: ”Oh well, I’d probably have blown it on wine, women and a vanity space program.” Rowland and Hommels did not immediately respond to emails from Forbes on Tuesday.
While hindsight is 20-20, had Rowland kept his shares, he would have been King.com’s largest individual shareholder, with a stake bigger than those of current CEO and cofounder Riccardo Zacconi and Chairman Melvyn Morris. Zacconi–with more than 31 million shares–and Morris–with over 36 million shares–may become billionaires if the company’s shares post significant gains in King.com’s public debut, which could happen later in March.
Rowland, however, will have to settle for a role akin to founding Beatles member Pete Best–someone who exited too early to enjoy the real success of what he helped create. Though details about his departure are unclear, he resigned from his post as co-CEO in 2008 and, with Hommels, sold his shares back to the company in June 2011. According to King.com’s SEC document, “the terms of the repurchases were determined through arms-length negotiations among the applicable parties.”
In a talk at the London Business School four months after he ceased to be a shareholder at King.com, Rowland hinted at the possible circumstance surrounding his departure without naming the company.
“I had one business I started with people who I ultimately thought… weren’t very good business partners,” he said. “The thing about business partners is that very often people jump into them as if they were sort of one-night stands, but it very much is a marriage and you’re with the people for a terribly long time.”
A group of European entrepreneurs and engineers including Rowland, Zacconi, Sebastian Knutsson, Thomas Hartwig, Lars Markgren and Patrik Stymne founded King.com in 2003, with the latter five still maintaing roles at the social game outfit. Created soon after Rowland and Zacconi had experienced success with uDate.com (sold to IAC for more than $150 million in 2012), the firm was focused on creating web-based games, eventually shifting toward specifically developing for Facebook and mobile platforms, where it has experienced the most success.
Rowland left the company in June 2008 to start MangaHigh.com, which teaches children math through online games. In explaining his move to LBS students, he noted that King.com was already “very stable” and that he “had an idea for something new.”
“I had a feeling that the longer I waited, someone else was going to do it,” Rowland said, referring to his concept for MangaHigh. He also explained that staying at King.com wasn’t financially appealing.
“We sold a lot of shares to Apax Partners,” he said, noting the $43 million round raised in 2005 from Apax and Index Ventures. “We had taken on a couple rounds at the beginning. We had a few cofounders and my equity was quite diluted down. The company was going to have to be very, very big if I was to have my boat.”
Coincidentally, King.com has become “very big,” growing enormously since Rowland’s exit. The company’s monthly active users have jumped from 30 million in the first quarter of 2012 to 408 million in the last quarter of 2013, largely due to the success of hit game Candy Crush. Last year’s revenues for the Zynga competitor were nearly 30 times that of 2011 at nearly $1.9 billion.
Those figures for the already profitable King.com have made it into the next hotly anticipated technology IPO–and Rowland and Hommels are missing out. Had they not sold their shares for about 7.7 cents each in 2011, Rowland would almost be a billionaire, while Hommels would have had a healthy return for his investors. At today’s high-end anticipated price of $24 for King.com’s stock, Rowland’s 40.6 million shares would have been worth $966 million. Hommels, a member of Forbes’ Midas List and a renowned angel investor, would have overseen 42.7 million shares worth $1.02 billion.
Instead Rowland and Hommels walked away with about $2.9 million and $3 million, respectively.
In his presentation to LBS, Rowland expanded on his comparisons of business to marriages, bringing in the concept of divorce.
“When I’ve had bad business partners, I’ve known almost instantly. You start it and a week later you get into it and you say, ‘These people aren’t very collaborative’ or ‘These people aren’t very smart,’” he said.
“They say about divorce–if you’re going to get divorced from somebody–you know the reason why you’re going to get divorced… when you’re walking up the aisle.”
With King.com’s impending IPO, Rowland may be wishing he had kept his ring on a little longer.
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