Doubts About Candy Crush’s Sweetness

SUGAR RUSH FOR CANDY CRUSH  |  King Digital Entertainment’s filing of a $500 million initial public offering on Tuesday had many investors salivating. But it remains to be seen whether the company behind the addictive game Candy Crush can sustain its sweetness and avoid the pitfalls of other game makers, Jenna Wortham and Michael J. de la Merced write in DealBook. Indeed, Candy Crush attracts 93 million players each day and accounts for nearly 80 percent of the company’s revenue, which neared $1.9 billion by the end of 2013 from $164 million in 2012.

The game shows few signs of cooling, but its meteoric rise and King’s pursuit of a lofty valuation have raised fears of a bubble, though a very sweet one. “Already, there are signs that the company might be leveling off. King’s gross bookings and revenue declined in the fourth quarter of 2013, which it attributed in part to a decline in the Candy Crush business. King also emphasized that it expected its blockbuster hit to contribute less to its overall sales over time,” Ms. Wortham and Mr. de la Merced write.

From ReCode: “Candy Crush Saga maker King is preparing to go public, but one look at the ‘key metrics’ in its Securities and Exchange Commission papers tells a seemingly simple story: The company is popular and profitable, but may have already peaked.”

“The problem is, people like what they already know. King’s most recent title, Farm Heroes Saga, is basically the same game as Candy Crush Saga with different art, and Papa Pear Saga is pretty close to EA subsidiary PopCap’s seven-year-old puzzle game Peggle.”

BLACKSTONE’S IRISH COUP  |  What’s so bad about shadow banking if deals get done and jobs are saved? That’s the question posed by Bennett J. Goodman, a Blackstone executive who engineered an unorthodox arrangement awarding Blackstone 25 percent of Ireland’s telephone giant, Eircom, in return for more favorable terms on its punishing debt burden. Mr. Goodman argues that Blackstone, whose paper profits from the Eircom deal stand at about $1.4 billion, is providing loans that companies could not get from banks, but some are questioning the risks associated with this shadow banking, Landon Thomas Jr. writes in DealBook.

“In the last few years Mr. Goodman’s team has been one of the more innovative financiers in Europe, securing outside-the-box lending arrangements with desperate borrowers in Spain, Germany and Britain as well as Ireland,” Mr. Thomas writes, adding, “More so than its competitors, the firm has been quick to branch out into other businesses, including hedge funds, real estate and corporate and government advisory work. And in such a small country as Ireland, with the government under pressure to offload more than $150 billion of distressed assets, it was not surprising that Blackstone’s full-court press raised a few hackles.“

NEW COMPLAINTS FOR HOMEOWNERS  |  The problems for homeowners never seem to end. The same abuses that led to an enormous settlement between the nation’s largest banks and federal authorities in 2012, including shoddy paperwork, erroneous fees and wrongful convictions, are once again plaguing borrowers. But this time these issues are dogging the specialty firms that collect mortgage payments, known as servicers, Jessica Silver-Greenberg and Michael Corkery report in DealBook.

These servicing companies, including Nationstar and Ocwen Financial, have been buying up servicing rights with an incredible appetite. But, as a result, “some homeowners are mired in delays and confronting the same heartaches, like the peculiar frustration of being asked for the same documents over and over again as the rights to their mortgage changes hands,” Ms. Silver-Greenberg and Mr. Corkery write, adding, “As the buying bonanza steps up, some federal and state regulators are worried that the rapid growth could create new setbacks like stalled modifications for millions of Americans just as many were getting back on track from the housing crisis.”

“Some of the problems, analysts and regulators say, come down to the speed. The specialty servicers have not upgraded their technology or infrastructure to accommodate the glut of new mortgages,” they write. “The servicers benefit when they work through the troubled loans as quickly as possible. That has raised questions about whether the companies are pushing homeowners into foreclosure or offering mortgage modifications that will keep homeowners treading water, but ultimately cause them to fall even further behind.”

ON THE AGENDA  |  Housing starts for January are out at 8:30 a.m. The Federal Reserve publishes the minutes for its January policy-making meeting at 2 p.m. Two regional Federal Reserve presidents give speeches â€" James B. Bullard, the president of the St. Louis Fed, discusses the economy in Washington at 1 p.m., and John C. Williams, the president of the San Francisco Fed, takes the stage in New York at 6:15 p.m. The Carlyle Group releases earnings before the bell. Maurice R. Greenberg, the head of the Starr Companies, is on Bloomberg TV at 8 a.m.

EXAMINING A COMPENSATION DOUBLE STANDARD  |  It may be time to call a truce on the Wall Street bias in looking at executive compensation, Steven M. Davidoff writes in the Deal Professor column. When Google’s board awarded Eric E. Schmidt, its former chief executive and current chairman, $100 million in restricted stock plus $6 million in cash, few questioned the exorbitant pay package. But compare this with the outcry over the 2013 pay for Jamie Dimon, the chief executive of JPMorgan Chase, or for Lloyd C. Blankfein, the chief executive of Goldman Sachs.

“Wall Street is certainly known for its high-end consumption, but it is also a place where being conspicuous about it is frowned upon. In Silicon Valley, however, the superwealthy can flaunt their toys and no one says a word,” Mr. Davidoff writes, adding, “Wall Street bashing ignores the fact that it is finance that produces the money for tech start-ups. Finance may not be the sexy part of life, but it is integral to success, as much as good roads or telecommunications. And yes, finance has had its problems â€" but so does Silicon Valley.

THE ALLURE OF ‘YOUNG MONEY’  |  “Young Money,” the new book by Kevin Roose about the hidden world of today’s junior Wall Street workers, shot into the top 10 on Amazon’s best-sellers list during the book’s first day on shelves (as of Wednesday morning, it had fallen very slightly in the rankings). And, as Mr. Roose noted on Twitter on Tuesday, a collectible version of the book is already on sale.

Mergers & Acquisitions »

Icahn Orchestrates $25 Billion Drug Merger  |  Forest Laboratories agreed to be sold to Actavis in a cash and stock deal to create a company with heavy exposure to branded and generic drugs.
DealBook » | DealBook: For Icahn, Drug Maker Deal Came After a Long Fight

Actavis Deal May Become the Standard for Drug Deals  |  Actavis is not alone in its penchant for acquisitions, Robert Cyran writes for Reuters Breakingviews. Valeant Pharmaceuticals and Endo Health Solutions are among those that have also enhanced their market values by snatching up rivals, slashing costs and minimizing taxes.
DealBook »

Another Big Windfall for JPMorgan in Drug Maker Deal  |  JPMorgan stands to earn $55 million to $65 million in fees for advising Forest Laboratories in its acquisition by Actavis, according to estimates from Freeman & Company.
DealBook »

Eminence Capital Criticizes Jos. A. Bank’s Eddie Bauer Deal  |  Eminence Capital, a hedge fund with a substantial stake in the men’s retailer Jos. A. Bank, is not pleased with the company’s proposed $825 million deal for the parent of Eddie Bauer, calling the merger “a poor strategic decision” at an “excessive” price, The Wall Street Journal reports. Eminence has been encouraging a deal between Jos. A. Bank and its rival, Men’s Wearhouse, in which the hedge fund also has a significant stake.
WALL STREET JOURNAL

MDC Partners Buys Majority Stake in Canadian Proxy Solicitor  |  MDC Partners, a media agency holding company, is expanding into a classic Wall Street business, proxy solicitation, with its acquisition of a majority interest in Kingsdale Shareholder Services.
DealBook »

Chinese Firm and France to Buy Stakes in Peugeot  |  PSA Peugeot Citroën, the struggling French automaker, will receive big injections of capital from the Chinese automaker Dongfeng Motor and the French government, Dongfeng announced Wednesday in a filing in Hong Kong, The New York Times reports.
NEW YORK TIMES

Tyson Said to Make Offer for Michael Foods  |  Tyson Foods, the largest processor of beef and chicken in the United States, is said to have made a bid for Michael Foods, which is controlled by the private equity arm of Goldman Sachs, Bloomberg News writes, citing unidentified people familiar with the situation.
BLOOMBERG NEWS

General Mills Looks to Expand Into Emerging Markets  |  General Mills, one of the world’s largest food makers, said it is looking for deals in emerging markets to expand its business, Reuters reports.
REUTERS

INVESTMENT BANKING »

Puerto Rico Wants to Incur More Debt to Regain Financial Footing  |  Puerto Rico wants to sell billions in bonds to raise money to pay its debts, but some are concerned that the American territory may be overstepping its ability to repay.
DealBook »

Capital One to Revisit Credit Card Contract Terms  |  The company said it would rethink the wording of its credit card contracts after a provision that said the bank could “contact you at your home and at your place of employment” began attracting a lot of unwanted attention.
DealBook »

Lenders Return to Securitized Mortgages  |  Some of the same advisers who helped develop new mortgage rules to prevent a return of the subprime boom are now part of a growing industry that is hoping to profit from making loans that fall outside of the new “qualified mortgage” regulation, The Financial Times reports.
FINANCIAL TIMES

PRIVATE EQUITY »

Investors Bolster European I.P.O. Frenzy  |  Companies backed by private equity are looking to raise more than $8.3 billion in initial public offerings, as private equity firms are looking to capitalize on strong investor interest in the region, The Financial Times writes.
FINANCIAL TIMES

Private Equity-Backed Poundland Approves I.P.O.  |  Poundland, the British variety store, which is 75 percent owned by the private equity firm Warburg Pincus, has given the go-ahead to its initial public offering of about £700 million, The Financial Times reports.
FINANCIAL TIMES

HEDGE FUNDS »

Hedge Fund Suit Seeks Identity of Anonymous Blogger  |  The suit by David Einhorn’s Greenlight Capital hedge fund illustrates the tension between a money manager’s ability to safeguard his trading strategies and the rights of others to report on them.
DealBook »

Herbalife Reports Higher Earnings  |  Herbalife, the nutritional supplements maker that has been the focus of a public battle with the activist investors William A. Ackman, who leads the hedge fund Pershing Square Capital, reported a 10 percent rise in fourth-quarter earnings, The Wall Street Journal writes.
WALL STREET JOURNAL

The Farewell Email SAC’s Compliance Chief Probably Did Not Send  |  Bloomberg Businessweek has imagined a good-bye letter from Steven L. Kessler, SAC Capital Advisor’s compliance chief who announced last Friday that he would leave the firm.
BLOOMBERG BUSINESSWEEK

I.P.O./OFFERINGS »

Pets At Home Announces I.P.O.  |  Pets At Home Group, a British company that sells pet food and other pet products, announced plans for an initial public offering that values the company at about $2.5 billion, Reuters writes. The company is backed by the private equity group Kohlberg Kravis Roberts & Company.
REUTERS

Box Hires SAP Executive  |  Graham Younger, a senior executive at the European software maker SAP, was named the executive vice president for worldwide field operations at Box, which is expected to go public this year, ReCode writes.
RECODE

Borderfree Aims to Raise Up to $86 Million in I.P.O.  |  Borderfree, a company that helps retailers deal with online customers in foreign countries, has filed for an initial public offering of up to $86.25 million in stock, The Wall Street Journal writes. The company said that it expects to use the net proceeds for corporate purposes.
WALL STREET JOURNAL

Examining King’s Decision to List Its Shares in New York  |  The decision by King Digital Entertainment, the maker of Candy Crush, to list its shares on the New York Stock Exchange is “another blow London, which has been touting itself as the new Silicon Valley,” Quartz writes.
QUARTZ

Index Ventures to Benefit From Candy Crush I.P.O.  |  The European venture capital firm Index Ventures is set to reap rewards from the initial public offering of King Digital Entertainment, the maker of Candy Crush Saga, The Wall Street Journal reports. King is expected to be valued at $8 billion to $10 billion, making Index’s shares worth as much as $800 million given its 8 percent stake in the company.
WALL STREET JOURNAL

VENTURE CAPITAL »

An Everyday Test for Bitcoin  |  A Wall Street Journal reporter spent a week using Bitcoin, with surprising results: The virtual currency was neither anonymous or shadowy, he writes.
WALL STREET JOURNAL

Postmates Closes New Financing Round  |  Postmates, a delivery service that allows people to order food and other items delivered via bicycle messenger, said it is now processing more than 10,000 deliveries a week and is raising $16 million in a Series B funding round to help it expand to new cities in the next year, the Bits blog reports. The new funding round brings the companies total to $22 million.
NEW YORK TIMES BITS

Teenager Who Sold Start-Up to Yahoo Makes First Investment  |  Nick D’Aloisio, the teenager who sold his tech start-up to Yahoo for an estimated $30 million, has used some of his proceeds to invest in Sweden’s Tictail, an online store developer that has attracted attention in the Swedish technology scene, The Financial Times writes.
FINANCIAL TIMES

Duolingo Collects $20 Million  |  Duolingo, the addictive language-learning application, announced it had raised $20 million in Series B funding led by Kleiner Perkins Caufield & Byers, adding to the $18.3 million it had raised previously, ReCode reports. The new funding will be used to develop its paid products.
RECODE

Media May Be to Blame for Perkins Controversy  |  “None of this would have happened â€" the public discussion, the fracas over one man’s comments, the sheer entertainment value â€" if not for the role of the news media. Specifically, the local newspaper, warts and all, was critical to prodding Thomas J. Perkins’s thinking,” Adam Lashinsky writes in Fortune.
FORTUNE

Start-Up Socialbakers Raises $26 Million  |  Socialbakers, a start-up that provides social media analytics to marketers, has collected $26 million in a Series C round of funding led by Index Ventures, bringing its total to about $34 million, ReCode writes.
RECODE

LEGAL/REGULATORY »

Fed Closes a Loophole for Banks Overseas  |  The new rules will force the American operations of foreign banks to follow many of the same rules as American banks, including holding more capital as a financial buffer to absorb losses.
DealBook »

To Regulate Foreign Banks in the U.S., ‘Trust, but Verify’  |  Foreign banks that do business in the United States are not required to be sufficiently capitalized to sustain unexpected losses, putting American taxpayers at risk, writes Mayra Rodríguez Valladares in the Another View column.
DealBook »

Schumer Recuses Himself From Review of Comcast Deal  |  Senator Charles Schumer, Democrat of New York, has recused himself from reviewing Comcast’s agreement to buy Time Warner Cable after the revelation that his brother, the lawyer Robert Schumer, worked on the merger.
DealBook »

For Settlements, Companies Sketch Contours of a Black Box  |  The disclosure of litigation reserves by companies gives an indication of how much a settlement with the government will be, but it sheds no light on the process of assessing a penalty.
DealBook »

A New Era of Antitrust Enforcement  |  The investigation into the manipulation of Libor is just the beginning of more vigorous antitrust enforcement by the government, writes John Terzaken, a former antitrust official at the Justice Department who oversaw the Libor case, in the Another View column.
DealBook »

Judge to Consider A.I.G.’s Request to Delay Bank of America Deal  |  Supporters of Bank of America’s $8.5 billion deal to compensate investors who bought the bank’s faulty mortgage securities said that American International Group is holding the agreement “hostage,” Reuters reports. A judge has called a hearing for Wednesday to hear A.I.G.’s arguments.
REUTERS