The Angry Birds are soaring once again. Shares of Rovio, the Finnish company behind the cult computer game, today made a solid debut on the Helsinki stock exchange.
Sold at €11.50 each, at the top of the €10.25-€11.50 price range published prior to the flotation, they quickly rose to as high as €12.34 in morning trade.
That values Rovio at €961m, not bad for a business that has been denigrated as a one-trick pony and which has had its fair share of ups and downs in recent years, but well short of the €7bn valuation that was being suggested in the Finnish press back in December 2011 when Angry Birds fever was at its peak.
Demand for Rovio shares has been strong. It quickly became clear that institutional investors were keen to get on board, so much so that plans to sell shares to retail investors were swiftly pulled.
Prior to the flotation, Rovio was 69% owned by Trema International, a company controlled by Kaj Hed, uncle of Niclas Hed, Rovio’s co-founder.
Trema, along with the venture capital firms Accel Partners and Atomico, has received some €458m from the flotation.
Trema will continue to own 36.6% of the company.
In addition, Rovio raised some €30m in new money, which has been earmarked to finance future growth.
That is quite a small sum, relative to the size of the company, which highlights the main reason for floating – to allow existing shareholders to sell down some of their investment and broaden Rovio’s ownership.
The company is also hoping that, by having a public listing, it will be able to use its shares as acquisition currency in future deals – as well as being able to offer current and future employees shares with a tangible value.
It has been an interesting journey. Angry Birds, which launched in 2009, is the most downloaded game in the history of mobile gaming. In all, by the end of June this year, Rovio’s games had been downloaded some 3.7 billion times.
Yet, while Rovio’s gaming revenues have increased every year since 2010, none of the follow-ups to the original game, including Angry Birds Seasons and Angry Birds Space, had quite the impact of the original.
Image: Rovio CEO Kati Levoranta and Nasdaq Helsinki President Henrik Husman
That left Rovio increasingly reliant on licensing deals on Angry Birds clothes, drinks, toys and books and it had to rein in ambitions to open scores of Angry Birds-related theme parks around the world, although a handful of sites have opened, including one in Nottingham.
When non-gaming revenues started to fall, the company was tipped into the red, forcing it to cut costs. The most notorious round of belt-tightening came when, in December 2014, the company announced it was closing its development studio in Tampere, Finland, with the loss of 130 jobs.
But then salvation came with the unexpected success of the Angry Birds Movie, produced by Colombia Pictures and released in May last year, which has grossed just under $350m worldwide to date.
Rovio is now back in the black, recently announcing a half year pre-tax profit of €13m, with sales up 94% to a record €153m. Tweaks to the format, including live daily updates for fans, have also breathed life into older versions of the game, most notably Angry Birds 2, originally released in July 2015.
The big question being asked by investors is what Rovio’s growth prospects look like from here.
Gaming will remain at the heart of the company and, it hopes, new franchises can be developed to reduce dependence on the Angry Birds franchise. Battle Bay, launched earlier this year, has for example won rave reviews among gamers.
Launching the flotation, Kati Levoranta, Rovio’s chief executive, said: “In the core of our strategy there is a principle to only launch games that have potential to reach top-grossing lists and have a long lifetime. Our latest game releases prove that we have reached our goal.
“But Rovio is more than just a gaming company. Angry Birds-branded consumer products are already sold in some 120 countries. The listing is an important step in developing Rovio into an even stronger games-first entertainment company.”
There is a nagging feeling, though, that Rovio missed an opportunity to float on the stock market when Angry Birds fever was at its height.
King Digital, maker of the rival Candy Crush game, did not miss its chance to do just that in 2014 and was rewarded with a lavish valuation – even if the shares turned out to be a disastrous investment and the company collapsed into the arms of computer games maker Activision Blizzard 18 months later.
Another company that did not miss out on the chance to float when its core game was at peak popularity was Zynga, the maker of Farmville, although anyone who invested during its IPO in 2011 has also been burned.
Investors will hope that, with a less-outlandish valuation than King Digital or Zynga, Rovio can fare somewhat better than those two.