Roblox (RBLX) Stock IPO – Here’s What Investors Need To Know
In February 2021, the company postponed the Roblox IPO. And instead, they chose the direct listing route.
Later on March 10, 2021, Roblox IPO direct listing went live under the name of RBLX.
Roblox IPO stock had a suggested price point of $45 a share–as set by the New York Stock Exchange.
On the first day of trading, Roblox stock went up by 54.4%. And the next day, it climbed 6.3% more, closing at $73.90.
Back on March 11, 2021, the market value of Roblox shares went near to $39.5 billion. Almost double the size of Epic Games.
People who would have bought the RBLX stocks on the first day for just $100 got a $64 profit just the day after. Over 50% profit on the initial investment.
Roblox IPO stock has a lot of potentials. Even in the pandemic, the Roblox stock has been pumping and maintaining good value.
As an investor, you are a month late from the initial Roblox stock IPO listing date. But still, you can invest in Roblox stocks as things are just getting better for them.
According to recent Roblox filings with the SEC, the company said they generated $924 million in revenue–82% more than 2019. And saw a 56% growth!
As of writing this piece, the cost of Roblox stock is somewhere around $71. And the chances are that the Roblox stock IPO price will increase with time. Why? More on that in the next section…
A Leading Gaming Platform You Don’t Want To Miss
Roblox is more than just a casual game. It lets users create custom-generated online games that others can play.
Before Roblox, the company initially offered students an educational physics engine to simulate things.
Eventually, Roblox built upon their idea and released the game on September 1, 2006. And since then, it’s been one of the most popular games amongst teenagers.
The average Roblox age group is children under the age of thirteen.
Roblox has a vast online community and followers. According to Roblox, there are 32 million daily active users for 2020 compared to 12m in 2018. Representing a 78% compounded annual growth rate.
Roblox recorded a total playtime of 30.6 billion hours in 2020, accounting for 2.6 hours per average daily active user per day.
There are over 18 million user-generated content Roblox experiences.
All-in-all, all the statistics acclaimed by Roblox make it one of the leading platforms in the gaming industry.
Gaming Is Just Half The Story
As Roblox has a pretty unique take on game mechanics, its revenue-making system is also different.
Roblox makes the majority of its revenue via selling virtual items. You can sign-up, create an avatar, and access free and premium goodies.
Most importantly, as Roblox is a user-based game generating ecosystem, the players also play a considerable role in Roblox’s revenue.
Developers/players of Roblox create premium experiences and include paid items. When an average player buys an item or an experience, Roblox takes a cut from the purchase and lets the rest flow to creators.
To efficiently facilitate the trade between developers and users, Roblox has an in-game currency called Robux. Users purchase the currency via transactions or subscriptions that automatically bills the users’ accounts.
According to Roblox, there were 490,000 daily paying users in 2020. And the average spending per daily active user in 2020 is $57.7.
The better the content, the more people are attracted and are leaned towards spending money.
According to the company, 4,300 players/developers earned at least $350 in 2020. And 1,287 earned at least $10,000 in 2020.
That’s not it; there were three players in the Roblox ecosystem that made at least $10 million in 2020.
So, gaming is half the story–the other half is all about earning via the platform and providing once-in-a-lifetime virtual experiences to the Roblox family.
Roblox Stock Listing Avoids Traditional Route
Roblox initially filed for a standard Roblox IPO. But later, opted for a direct listing on March 10, 2021.
But why did that happen? Firstly, in a standard IPO route, the fee is relatively high. And for a company of Roblox’s size, Statista recorded a 4% fee.
Next up, Roblox didn’t want to go through the first-day IPO pop. As it would transfer the value of the company’s insiders to public market investors in a snap.
With a direct listing, the company is monitoring and analyzing the real demand and supply of its shares.
Roblox is currently selling the existing stocks to the public. Meaning they have complete control over their stocks.
However, if they would have chosen to go public via a standard IPO, Roblox would be selling parts of the company by issuing new stock.
Roblox took a great decision of not taking the traditional Roblox IPO route. They are still experimenting and testing their decision of going public via direct listing–and for the right reasons.
Growth May Taper Off After The Pandemic
Today, ROBLOX IPO stocks offer an excellent opportunity for investors. But remember that the growth rate of RBLX stock can change tracks after the COVID-19 pandemic.
COVID-19 pandemic has driven Roblox growth like no other factor. However, once we get past the pandemic, Roblox’s growth momentum may taper off.
Why? It’s because Roblox is unlikely to show free cash flow and revenue growth until 2022. And it can lead to the growth of Roblox stocks to taper off and get stuck in the middle of nowhere, at least till 2022.
Indeed, Roblox generated $923.9 million in revenue in 2020. But it also faced a net loss of $264.3 million. And if the same story continues in 2021, the company’s growth will face a significant loss.
Apart from that, once the schools will open, the target audience of Roblox (13 and younger) will have less time to spend on the platform. Thus, children will spend fewer hours and money on the game, resulting in the deceleration of the company’s growth.
While the growth of Roblox may be a threat in the near term, it will prosper in the long term. The management of Roblox is looking forward to offering content that will equally appeal to both the older and younger demographic.
Bottom Line On Roblox Stock IPO
Given the high valuation of the Roblox IPO stocks and analyzing the post-pandemic situation, short-term investment in Roblox will get you nowhere.
Although RBLX stocks seem exciting and promising, the risks are quite high as we are still in the COVID-19 pandemic.
We would recommend you wait till the end of COVID-19 to decide about going all-in with Roblox stocks.
Surely, Roblox’s growth and yearly revenue speak clearly that the company will win in the long term. But in the short term, one can’t truly predict how the market will react once we say goodbye to the lazy COVID-19 lifestyle.
If you can bear the loss, we will not stop you from investing in the high-risk Roblox stocks. However, if you want to play smart, ease on the idea of investing in Roblox immediately. Wait till we reach the end of the pandemic, and then make your decision.