Rovio shares fall by 20 percent thanks to rising UA costs

Rovio has seen its share price drop by 20 percent two months after its IPO, with declining profits and rising user acquisition (UA) costs the likely culprits. 

Shares began trading for around $13.6 when the Finnish outfit first went public, but are now going for around for $11 per share.

The company's financials for the three months ended September 30 show that revenues actually increased 41.2 percent year-over-year to $83.8 million. 

However, user acquisition costs rose by 308.7 percent to $26.3 million, while profits fell by 70 percent to $1.9 million. 

Meanwhile, revenue in Rovio's games division rose by 40 percent, with the company explaining it received a monetization boost from its "top games."

The company believes its games line-up will start to reap the benefits of its recent UA investments in around 8 to 10 months. 

"We significantly increased our investments in user acquisition, and at the same time in future revenues, for our top-performing games: investments increased to $26 million in the third quarter, which, as expected, reduced the profitability of the games business unit for the third quarter," explained Rovio CEO Kati Levoranta.

"We expect the payback time for these investments to be 8 to 10 months. In August, Rovio launched a new game, Angry Birds Match, which has promising performance indicators and the potential to become one of Rovio’s best performing games."