Roblox IPO: Should You Invest in Video Gaming Platform Stocks?

Roblox Corporation is the company behind the massively popular video game platform for kids, planning to go public on the New York Stock Exchange (NYSE) in March under the symbol RBLX. The disruptive company has a significant potential for growth, but will it be a revenue-bearing investment? 

Is Roblox a good investment?
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What is Roblox’s current valuation?

In January 2021, Roblox was valued at $29.5 billion after selling 11,888,886 shares and raising almost $535 million through Series H funding at a purchase price of $45 per share. The key investors who participated in this private placement included the following venture capital funds: Altimeter Capital, Dragoneer Investment Group, the Investment Group of Santa Barbara, Warner Music Group, and several current investors, according to the company’s website

Thanks to private funding, Roblox has acquired solid and reliable partners who believe in the company’s vision and are eager to support its growth. Marc Stad who is the Founder and Managing Partner of Dragoneer Investment Group said “Roblox has built a unique and imaginative virtual experience with a growing, loyal community, and we’re excited to have the opportunity to support the company at this stage of its development.”

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Has Roblox chosen IPO or direct listing?

Roblox is one of few companies which came to a decision that they prefer to go public via direct public offering (DPO) instead of initial public offering (IPO). The reason behind this decision is the fact that Roblox doesn’t want his underwriters to set a stock price as in a traditional IPO, but has chosen a direct listing to set the stock price by the buy orders the New York Stock Exchange receives. Eventually, the price will be dependent on the public investors' demand which may cause its high volatility on the day of its direct listing. 

By choosing a direct public offering, Roblox can self-underwrite its stocks and have the terms of the offering under control. Due to a direct listing, the company can customize the whole issuance process to its needs and interests. 

As the issuer, Roblox can set not only the offering price and the settlement date but also the limit on the number of stocks that one investor can buy and the minimum investment per investor. The firm can also set the offering period within which investors can buy the stocks and when the offering will be closed.

Additionally, going public via direct public offering lowers Roblox’s cost of capital by eliminating the intermediaries such as underwriters, investment banks, or broker-dealers. Consequently, the company can raise money without being restricted by any requirements associated with intermediaries. 

What’s more, Roblox’s shareholders who decide to sell their stocks will probably get a higher price than if this price had been set by underwriters in a traditional IPO. As Roblox won’t leave money on the table, it will possibly end up with a higher valuation eventually. Although Roblox itself won’t raise capital, its shareholders will. By selling 198.9 million shares of common stock via direct public offering, Roblox is planning to use DPO funds to finance its growth in order to extend its platform and develop new initiatives.

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What date is Roblox going public?

Following two IPO delays, Roblox is going public on March 10 is through the direct listing, according to the updated prospectus, which says:

“We have been approved to list our Class A common stock on the NYSE under the symbol “RBLX.” We expect our Class A common stock to begin trading on or about March 10, 2021.”

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What is Roblox IPO price?

Roblox's stock price is unknown. Unlike a traditional IPO, the price of Roblox stocks won’t be given before March 10. Following direct public offering procedures, it will be set on the direct listing day by the issuer on the basis of demand from investors. As a result, the opening price  may be not only higher than in the case of IPO price but also more volatile.  

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What is Roblox’s mission?

“Roblox’s mission is to bring the world together through play. We enable anyone to imagine, create, and have fun with friends as they explore millions of immersive 3D experiences, all built by a global community of developers”, according to the company website. On the Roblox platform, users can create digital experiences, make friends 

At the bottom of Roblox, there is an enormous desire of founders, David Baszucki and Eric Cassel, to give everyone a chance to develop their creativity and express themselves. By programming a 2D simulated physics lab named Interactive Physics in 1989, they were astonished to see what kids and teens were capable of designing and wanted to reproduce their idea on a large scale. 

“Roblox brings the world together through the power of play harnessing players and creators of different ages and backgrounds from all over the world connected by shared experiences,” according to David Baszucki. 

Roblox Corp. managed to create the community around its platform. By sharing digital experiences, users can make friends. They can also develop their creativity by producing their own games called “experiences”.

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What does Roblox do?

Roblox Corporation owns the video game platform called Roblox where users can both play plenty of games and make new games. Most games are free; however, when players want to upgrade their in-game life, they need to buy in-game currency called Robux. Roblox generates its revenue by selling Robux to players, but until the in-game buyer or developer spends it or converts it into dollars, the corporation doesn't recognize Robux sales as revenue. 

Roblox is driven by approximately 8 million developers who create their own games called “experiences” using a special engine called Roblox Studio. Game designers who build games can charge fees for in-game features and items and earn Robux which is convertible into real-world dollars. Developers whose games generate a high sales volume of in-game currency can earn big real-world money by monetizing Roblox. 

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What are Roblox’s financial results?

According to Statista, Roblox Corporation generated total revenues of over $156.78 million, $189.7 million and over $242.19 million in the first, second and third quarters of 2020, respectively. Between the first and the third quarter, there was a 35% growth in revenues based on the sales of Roblox’s virtual currency. 

In the first nine months of 2020, Roblox realized 588.67 U.S. dollars of revenue which is a 68% surge from the same period in 2019. The company’s financial result depends on Robux sales which skyrocketed by 171% to $1.24 billion. 

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Development Forecast 

By scrutinizing the numbers and latest achievements, Roblox seems to be a rising star with massive potential which is on the high road to success in the gaming industry. The strongest point of Roblox Corporation is an innovative business model which is based on the idea of user-generated content. By using a breakthrough engine called Roblox Studio, users can produce games without any coding skills. As a result the company isn’t a typical game producer but a social gaming platform which doesn’t have, usually very high, development, marketing and promotion costs. 

Roblox has a good chance of conquering the video games world as passion is what drives this company ahead. Roblox’s mission is “to bring the world together through play.” David Baszucki together with his co-founder Eric founded Roblox to have given each and every kid and teen a chance to develop their creativity to create and design whatever comes to their mind.

The fact that users can make their own games gives Roblox a huge advantage over its competitors as the company doesn’t need to employ its own developers who produce games and can focus solely on development of Roblox Studio. What’s more, it gives the company almost limitless opportunities for growth as potentially the number of games creators can rise more and more. 

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Author: Justine Ilone Siporski is the founder, CEO and Editor-in-chief of BUSINESS POWERHOUSE, the founder and CEO of LANGUAGE EMPIRE, coach, trainer and columnist dedicated to the advancement of entrepreneurs and the C-suite (CMOs, CEOs, CFOs, CIOs). Her key mission is to support leaders in achieving their highest potential, making the right decisions, and expanding their horizons. 

Disclosure: On the date of publication, Justine Ilone Siporski did not have (either directly or indirectly) any positions in the securities mentioned in this article. The article is not sponsored by Roblox Corp.

Disclaimer: The information contained herein is for informational purposes only and nothing in this article should be taken as a solicitation to purchase or sell securities.