Here’s everything you need to know about Roblox’s Initial Public Offering, which is expected to take place in early 2021.
Roblox, whose online gaming software has become hugely popular with children and teenagers during the pandemic, filed its IPO prospectus back in November. The company had previously wanted to go public by the end of 2020 but has since delayed its IPO until next year, presumably due to witnessing head-turning results for the initial public offerings by Airbnb and DoorDash.
Roblox is an online gaming platform and game creation system that allows players to program games and play titles created by other users. The online gaming hub allows users to create an avatar that they can play different titles with, for free. The company makes money by selling digital currency ‘Robux’ that can be used to buy virtual goods and enhance characters. Roblox also allows users to rent servers to host virtual gatherings, which have been particularly popular during the lockdowns.
When can I buy Roblox stock?
Although there is no set date for the IPO yet, it’s expected we will be able to buy shares in January 2021 when the company will trade its stock on the New York Stock Exchange under the ticker ‘RBLX’.
Currently, there is no decided share price or a set number of offer shares. However, it is expected that the company will try to raise $1 billion through its IPO, bringing its total valuation to $8 billion.
In the first nine months of 2020, Roblox boasted 31.1 million daily active users, up 81% year-over-year (YoY), and made more than $1.2 billion from selling virtual currency. The company overtook hugely popular computer game, Minecraft, in active monthly users this year.
There’s something unique (and a little confusing) about the way video game companies like Roblox report financials. A key number for Roblox is net bookings which is how much money, real money, was converted into Robux. For the first nine months of 2020 it was $1.24 billion, representing a 171% increase (YoY). However, money on its platform can’t be viewed as revenue until it’s actually spent. So, their revenue number is actually around $589 million.
Roblox’s IPO prospectus reported net losses of $203 million in the first nine months of 2020 on revenues of $589 million, compared with losses of $46 million on revenues of $350m (YoY). Roblox said this was owed to increased spending on infrastructure, safety, development, and paying more app store fees due to most of its players being on mobile phones.
Roblox’s Growth Potential
Roblox first launched in 2006, but the gaming company has never seen a year like 2020. Lockdown restrictions have forced children to spend an unprecedented amount of time indoors this year which has lifted the gaming sector as a whole. Roblox has been hailed the ‘YouTube of the gaming world’ due its unique platform. The company’s pull of enticing gamers to the platform to not just play games, but to create their own has given children a new innovative way of spending their time.
This innovation is a great business model as while other developers spend millions creating a new game, it costs Roblox nothing to bring a new game on board. Some experts have said that Roblox still lacks polish in a number of areas — including its developer tools — but these are considered “low-hanging fruit” for the company and easily solvable.
However, Roblox has also drawn concern from parents over the potentially addictive nature and offensive content on the platform. Roblox even listed the challenge to “provide a safe online environment for children” as a risk factor in its IPO prospectus.
There is a lot to look forward to with Roblox’s IPO. Investors just need to decide if they believe the post-pandemic future looks promising for Roblox. If we look at data coming out of Asian markets that have left lockdowns, the pandemic boost in demand is unlikely to disappear overnight. The company is expected to perform well as even more pre-teens begin to explore the world of gaming development.
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