Roblox is set to go public in February through a direct listing on the New York Stock Exchange. Originally, the company was slated to go public via a traditional IPO in December. However, the company changed its plans as companies like Airbnb (Nasdaq: ABNB) and DoorDash (Nasdaq: DASH) opened well-above their pre-IPO prices. Such a reaction means that the banks that control the IPO process underestimated demand for new issues and the company's value, implying that they likely could have sold their shares at a higher price.
February
Roblox will start trading under the symbol RBLX. The company will likely save significant sums of money by going public through a direct listing. Some recent well-known companies that have gone public through this route are Spotify (Nasdaq: SPOT), Slack, Palantir (Nasdaq: PLTR), and Asana (Nasdaq: ASAN).
Traditional IPOs often come with lock-up periods that can serve as limits on supply, creating artificial scarcity. Thus, many direct listings see unusual volatility in the first few months of trading. However, the strong IPO market in 2020 meant that this didn't happen last year.
The company also recently raised $520 million in a private financing round earlier this month. By taking this route to the public markets instead of a traditional IPO, Roblox is following Spotify, Slack, Palantir, and Asana, sidestepping a share sale and instead allowing existing stakeholders and employees to sell stock to new investors right away. The latest funding round valued Roblox at $29.5 billion.
Stock Price Outlook
Roblox is likely to see a strong debut given that it has many characteristics that investors are fond of. Users spend a massive amount of hours on the platform. According to its S1, it has 31.1 million users who spent 22.2 billion hours on the platform. Developers on the platform earned $221 million in revenue.
Roblox has been dubbed as a "metaverse" as users' avatars jump between games. Users can purchase in-app virtual currencies, add-ons to their avatar, and premium versions of games. Thus, it combines features of a SaaS company with high amounts of recurring revenues, high margins, and a sticky product. Additionally, video gaming continues to be in a bull market in terms of time spent. Yet, there is a lack of video-game stocks that are publicly traded. Another reason is that video gaming is in the early stages of monetization compared to other media sources.