UPDATE 2-Mobile game distributor iDreamSky's shares soar 27 pct in debut

Thu Aug 7, 2014 12:51pm EDT

* Shares open at $17.50, above IPO price of $15

* Values company at about $811.3 mln at day's high (Adds analyst comment, background)

By Amrutha Gayathri

Aug 7 (Reuters) - Shares of iDreamSky Technology Ltd rose as much as 27 percent in their debut, highlighting the mobile game distributor's ability to cash in on the popularity of hit games such as "Fruit Ninja" and "Subway Surfers" in China.

IDreamSky has partnered with top game developers such as Halfbrick Studios, Kiloo Group and Imangi Studios to distribute their games in the Chinese market.

The Shenzhen, Guangdong-based company also redesigns games to give them a local flavor.

For instance, it has added a customized payment method and Chinese-style blades to Halfbrick's blockbuster "Fruit Ninja", a game where users slice fruit flung across the screen.

The surging popularity of such games among smartphone users in China helped iDreamSky to grow its revenue 13-fold to about RMB 247 million ($41 million) and swing to a profit in 2013.

The IPO follows "Candy Crush Saga" maker King Digital Entertainment Plc's dismal offering in March. King's shares are trading 14 percent below their IPO price.

Zynga Inc, the social gaming firm known for Facebook games "FarmVille" and "Mafia Wars," has also failed to live up to investors' expectations. Its shares have lost 72 percent of their value since their listing in 2011.

Francis Gaskins, research director at Equities.com, said iDreamSky's solid debut did not necessarily indicate a revival of interest in gaming companies but signaled an appetite for the company's ability to boost its revenue.

IDreamSky's shares touched a high of $19.05 on the Nasdaq on Thursday, valuing the company at about $811.3 million.

The company is backed by some of the biggest names in the Chinese technology industry.

Tencent Holdings Ltd, China's largest listed internet company, is the biggest shareholder with a 23 percent stake.

IDreamSky's chief executive and co-founder, Michael Xiangyu Chen, is the second-largest shareholder with a 21.2 percent stake.

Other shareholders include private equity firm Redpoint Ventures, an early investor in TiVo Inc and Netflix Inc , and Legend Holdings Ltd, the controlling stakeholder of PC maker Lenovo Group Ltd.

IDreamSky raised $115.5 million after its initial public offering of 7.7 million American Depositary shares were priced at $15 each, above the expected range of $12-$14 per share.

The company, which also distributes games from Walt Disney Co and Gameloft SA, said it plans to use the proceeds from the offering to acquire game licenses, other intellectual property rights and for acquisitions.

More than 10 Chinese companies have debuted in the United States so far in 2014, according to Thomson Reuters data. Chinese online retailer Alibaba Group Holding Ltd IPO-BABA.N is expected to debut later this year.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Stifel, Nicolaus & Co Inc were the lead underwriters for iDreamSky's offering. (Reporting by Amrutha Gayathri; Editing by Saumyadeb Chakrabarty)