Inside Roblox’s Stock Debut, from Direct Listing Decision to Its Financial Outlook
Videogame platform’s shares to begin trading March 10 on New York Stock Exchange
Roblox Corp. will soon join the ranks of closely held companies turning to public markets to support growth. The San Mateo, Calif.-based videogame provider’s stock will begin trading March 10 on the New York Stock Exchange under the symbol RBLX. The shares are trading through a direct listing, bypassing the traditional route of an initial public offering.
Roblox’s reference price was set at $45, in lieu of a formal IPO price, and is based on recent private-market transactions.
Roblox isn’t a traditional videogame company and is using a nontraditional process to potentially reach investors as the pandemic has driven people to spend more time and money on gameplay. Here’s what you need to know about the company and its plans for a direct listing.
What is Roblox?
Roblox is a free online platform that features tens of millions of multiplayer games made by its own players with tools the company provides. The games range from obstacle-course challenges and iterations of capture the flag to contests based on popular characters such as Peppa Pig and Sonic the Hedgehog. Company officials have said they are interested in increasing the use of Roblox for things such as virtual concerts and meetings.
Who plays Roblox and how?
Roblox is accessible on computers, consoles and mobile devices. The company said it had roughly 33 million daily users last year, of whom more than half are under the age of 13. Players in Roblox appear in the form of customizable avatars.
Who started Roblox?
Programmers David Baszucki and Erik Cassel started Roblox in 2004. Mr. Cassel died from cancer in 2013, and Mr. Baszucki serves as chief executive, president and board chairman. Mr. Baszucki remains the company’s largest shareholder and holds more than 70% of the voting rights.
How does Roblox make money?
Roblox primarily generates revenue through sales of Robux, a virtual currency that players can buy with real money to enhance their experience. For example, Robux can be spent on virtual pets, vehicles or premium avatar accessories. The company also has a subscription service that lets users buy Robux monthly at a discount and receive other benefits such as the ability to trade items.
Roblox generated $923.9 million in revenue last year, up from $508 million in 2019.
Roblox posted a loss of more than $253 million in 2020, compared with a loss of $71 million in 2019, due to an increase in fees paid to developers and other expenses such as those for its information-technology infrastructure, safety, and research and development. Operating cash flow was $524 million last year, up from $99.2 million in 2019.
The company projects brisk business in 2021 as well, with revenue forecast to rise between 56% and 64% to between $1.44 billion and $1.52 billion. It expects its daily user count to climb as high as 36.4 million, helped by attracting users older than its primarily Generation Z base and from regions such as western Europe and East Asia.
How much is Roblox worth?
Roblox was privately valued at $29.5 billion in January after raising more than a half-billion dollars of funding from private investors such as Altimeter Capital and Dragoneer Investment Group. The company was valued at $4 billion following a February 2020 fundraising round led by Andreessen Horowitz.
Once the shares begin trading, the company’s valuation could fluctuate.
What is a direct listing, and how is it different from an IPO?
A direct listing allows a company to float its shares on a stock exchange while saving a significant portion of money paid to investment banks in a traditional IPO. It may also allow private companies to capture more of the gains in their share price when they go public. Typically, the gains during a first-day share pop are enjoyed by institutional investors like mutual funds and hedge funds who buy shares before the company starts trading publicly.
Companies typically go public to raise money from investors. But in a direct listing, companies don’t raise any cash since it allows existing shareholders to sell their shares.
The $45 reference price set by the NYSE for Roblox’s Class A shares comes after the company issued preferred stock in its latest round of private funding at the same price.
Other companies that have completed direct listings are Spotify Technology SA, Slack Technologies Inc. and Palantir Technologies Inc.
Roblox originally planned an initial public offering last year but held off after company officials decided that the strong trading debuts of Airbnb Inc. and DoorDash Inc. made it too difficult to determine the right price for its shares.
Roblox is expected to join other videogame-industry companies that have gone public within the past year such as Corsair Gaming Inc., Unity Software Inc. and Playtika Holding Corp.