Roblox IPO: what you need to know about the direct listing

roblox direct listing

Developers have created more than 18 million games/experiences for the Roblox platform, though users tend to gravitate to a much smaller subset of the available content. Flexibility in gameplay is critical to Roblox’s long-term value proposition, since it hopes to avoid the boom-and-bust cycle of a typical standalone game. In simpler terms, Roblox enables developers to build games within the Roblox virtual world, which looks like a crossover between Minecraft and Lego. Developers publish and distribute their games through Roblox to an audience of some 31.1 million daily active users. This probably means that Roblox is less concerned with raising more capital as part of a planned direct listing. Instead, the direct listing is merely giving existing investors a planned liquidity event to cash out if they want to.

Roblox is working with Goldman Sachs Group Inc. and Morgan Stanley, according to its filings, and plans for its shares to trade under the symbol RBLX. The exchange disclosed the price in a statement Tuesday, confirming an earlier report by Bloomberg News. Roblox isn’t yet profitable, but it has managed to grow revenue at an impressive clip. According to the company’s amended S-1, Roblox generated $614 million in revenue for the nine months ended Sept. 30, 2020, representing a 70% jump from the same period in 2019. Costs grew even faster than revenue, however, so Roblox posted a $197 million consolidated net loss in the 2020 period, down from the $38 million consolidated net loss in the first nine months of 2019. Here’s everything you need to know about the company and its direct listing.

This happens when banks sell swathes of a client’s shares to financial institutions, which can in turn flip those shares once the stock starts trading and stand to gain a profit if the share price rises. The direct listing route allows companies to avoid underwriting fees, which can provide considerable savings, and gives them the option to list existing shares on the stock market instead of issuing new ones as in an IPO. Roblox has opted to go public through a direct listing rather than a traditional initial public offering (IPO).


The Wall Street Journal reported that it was the trading action on Airbnb and DoorDash that caused company executives to delay rather than leaving capital on the table. After postponing the planned IPO, Roblox raised over half a billion in a Series H funding round. The latest funding round values the company at $29.5 billion – a massive jump from $4 billion in its previous funding round. Baszucki and his cofounder, Erik Cassel, played around with physics in a virtual world, and they coded a platform where kids and adults could interact in 3D simulated virtual environments. The materials were physically accurate blocks, like a world full of virtual Legos, and users could build whatever they wanted.

  • Like Airbnb insiders couldn’t sell shares on day one of that IPO, it just wasn’t allowed.
  • It can be difficult to get a lot of interest for direct listing because like I said, there’s no roadshow, there’s no buildup toward it.
  • The direct listing, the company and its investors, they simply list the shares that already exist directly on the public markets.
  • Still, Roblox’s net loss widened to $253.3 million from $71 million in 2019 as the company almost tripled the amount of money it paid to developers through its revenue sharing program.
  • If it decides to sell 10 million new shares, the price of those 10 million new shares will be determined by how excited investors are to buy their stock, not by whatever price the underwriters decided to sell it to hedge funds for it.

San Mateo, California-based Roblox is among the world’s most popular gaming sites for children and offers a host of games across mobile devices and gaming consoles. San Mateo, California-based Roblox is among the world’s most popular gaming sites for children and offers a host of games across mobile devices and games consoles. In a statement, Roblox said it had raised around $520 million in a new Series H private fundraising round led by Altimeter Capital and Dragoneer Investment Group. Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Slack Technologies and Spotify Technology. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

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This means the company is not selling any shares in advance of its market debut, as is the case with IPOs. In a direct listing, no shares are sold in advance, as is the case with IPOs. The company’s share price in its market debut is determined by orders coming into the stock exchange.

Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch. In addition, be sure to read IBD’s after-the-close The Big Picture column each day to make sure growth investors have a green light. For Roblox, the advisors are Goldman Sachs, Morgan Stanley and BofA Securities.

roblox direct listing

It’s not dependent on a certain amount of shares being allowed to be traded. It democratizes the process, not just for investors like you and me, like we’re going to talk about in a second, but also for company insiders and things like that too. The direct listing, the company and its investors, they simply list the shares that already exist directly on the public markets. They do hire some financial advisors, but it’s much less of a process. They determine the day one price of the stock, which is the reference price, which will get into a little bit later.

The rule change around direct listings – one pushed for by the New York Stock Exchange (NYSE) – is tied up with larger issues related to the IPO market. The idea behind an IPO is that a company pays a fee for expert help and support pricing its shares so that the market buys all of them at the right price. The fees paid as part of an IPO are the biggest direct cost, and PWC estimates that the average underwriting fee is 3.5% to 7% of the gross IPO proceeds. Generally, the larger the deal, the smaller the percentage fee – although the dollar amount will of course be much larger when we are talking billion-dollar-plus IPOs.

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Instead, Roblox used a less common method of going public known as a direct listing. Following that filing, Roblox raised an additional $520 million in investment prior to listing earlier this year, settled in at an estimated valuation of $29.5 billion, and revealed plans to pursue a direct listing rather than an IPO. Direct listing is just one alternative to skirting IPO issues, of course. For years now, we have also seen companies choose to stay private and do more private funding rounds, only going through an IPO at a much more mature stage. This is what Roblox has done with the Series H round, although it has stated that the direct listing is in planning stages, thereby giving all the current investors a commitment toward eventual market liquidity. We don’t have to spend much time guessing why Roblox has walked away from its IPO.

Still, it said that it could see higher growth rates in 2022 and beyond as it attracts more older users and grows overseas. In a 2021 forecast issued on March 2, Roblox warned that it may see growth cool off. It noted that social distancing restrictions had boosted its business in 2020, and it expects rates of growth this year will be “well below” the previous year. Roblox has been lifted by a crush of consumer demand during the coronavirus pandemic.

With the higher-than-expected valuation, Roblox will be able to raise money in the future at a much higher price than it could have just a short time ago. And if any other company wanted to acquire Roblox, it will be far more expensive after today. Roblox hits the market coming off an explosive year of growth, primarily from kids who were stuck at home because Covid-19 forced schools to close and sports leagues to shut down. “We’re seeing a lot of growth in all ages. We’re moving, over time, to a point where there’ll be more 13-and-over people on our platform.” Meanwhile, direct listings of this size and scale are a relatively new innovation in the industry. Only four have happened before this one, but they’ve already attracted high-profile support from the likes of venture capitalist Bill Gurley and others.

Roblox Corporation, a video game company with an in-game purchase model, was supposed to complete its initial public offering (IPO) in December of last year. The company delayed its IPO after seeing Airbnb, Inc. (ABNB) and DoorDash, Inc. (DASH) post incredible first-day pops that challenged the valuation models for tech IPOs. Instead, the company has announced it will go public through a direct listing. We’ll look at what a direct listing is and why Roblox’s decision is a sign of trouble for the traditional IPO market. Roblox’s games have become so popular that people have played the best titles billions of times. In the year ended December 31, 2020, users spent 30.6 billion hours engaged on the platform, an average of 2.6 hours per daily active user each day.

Roblox stock surges on first day of trading to close up more than 50%

The direct listing option allows the market to set Roblox’s share price with financial advisors collecting buy and sell orders and helping to come to a matching price. Wilson Sonsini Goodrich & Rosati advised Roblox in the transaction. Shares began trading at $64.50, which represented a 43% increase from a private financing round in January, when the company sold shares for $45. The NYSE set a reference price on Tuesday of $45, though no stock changed hands at those levels.

One big difference is that there is no required lockup period. Setting a reference price is a requirement for trading to begin. Unlike the share price in a standard IPO, it isn’t a direct indicator of the company’s market capitalization. At $45 a share, though, the company would have a market value of about $30 billion, said a person familiar with the matter who asked not to be identified because it wasn’t public yet.

The metaverse

There may be more innovation to come in terms of how companies go public. Engage game professionals and drive sales using an array of Game Developer media solutions to meet your objectives. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act. The company will use the proceeds from the previous $520 million to hire more people.

Guide to Roblox – Forbes Advisor Australia – Forbes

Guide to Roblox – Forbes Advisor Australia.

Posted: Tue, 24 Jan 2023 08:00:00 GMT [source]

The direct listing also provides an opportunity for Goldman Sachs to get in on some of the direct listing action dominated by Morgan Stanley. Previously, Roblox began its public offering journey last year with all of those banks as IPO underwriters, plus three others — JPMorgan Chase, Allen & Co, and RBC Capital Markets. While those firms won’t receive league table credit for their work on the IPO, they may receive some compensation for their efforts, a source familiar with the amended deal previously told Insider in January. Banks advising on the Roblox direct listing include Goldman Sachs, Morgan Stanley, and Bank of America.

That suggests higher revenue per user, because the company sees the number of daily active users only increasing 6% to 12%, while total engagement hours are expected to be roughly flat. Roblox, the kids gaming app that surged in popularity during the pandemic, soared in its market debut on the New York Stock Exchange on Wednesday. The company’s stock closed at $69.50 apiece, giving the company a market cap of $38.26 billion.

Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. The company officially listed on the New York Stock exchange this morning, though notably no additional stock will be issued as trading opens due to the fact that it did so under a direct listing. Roblox, based in San Mateo, Calif., has seen its revenue and user base grow as the coronavirus pandemic has kept students home and in search of entertainment. The company was valued at $4 billion in a $150-million funding round in February 2020 that was led by venture capital firm Andreessen Horowitz.

Neil Rimer, a partner at Index Ventures (one of Roblox’s biggest backers) said in a blog post that he views Roblox as a new type of media company, much like Disney was when it emerged as a high growth company in the 1950s. The next steps are building more features that can enable the metaverse, where people would spend more time and engage in a wider variety of activities. As much as anyone, Roblox CEO Dave Baszucki is a kind of James Halliday figure, the fictional billionaire who built the Oasis, or the version of the metaverse in Ernest Cline’s sci-fi novel Ready Player One. (OK, maybe he’s more like Ogden Morrow, the cofounder of the Oasis in the novel). Like Halliday, Baszucki is the visionary who dreamed of building the metaverse in the early days of his company 17 years ago. Baszucki addressed that potential for future growth in his interview with Insider on Wednesday, too.

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