Roblox goes public in direct listing, worth $41.9 billion

Shares of Roblox, a popular video game platform, shot up nearly 55% to $69.50, giving the company a valuation of $41.9 billion. The direct listing of the company tells the world just how vulnerable the public markets believe the company has become with its 32.6 million daily active users.

Roblox listed shares, as per CNN Business, directly on the New York Stock Exchange as opposed to issuing new stock in an initial public offering. The NYSE had set a reference of $45 a share for the stock.

David Baszucki, Roblox CEO and co-founder, in an interview with CNN Business said the company is an amazing community where people are creating together. He said he was excited about the stock market debut, as it is good for longer-term investors and employees in Roblox to take part financially in the company’s success.

“For us, a direct listing seemed natural. It brings the whole community together and everyone is using the same price at the opening of trading,” Baszucki said. “The increased use of interactive entertainment offerings like ours by consumers, including younger consumers, may prompt calls for more stringent consumer protection laws and regulations that may impose additional burdens on companies such as ours.”

Baszucki said the company will look to generate more sales from advertising, emphasizing that it would be organic. He explained that  the small amounts of advertising they have been doing is immersive and authentic.

According to Venture Beat, Roblox has plenty of cash as it brought in $520 million in private funds last month at $29.5 billion valuation, which was seven times its value from a funding round from nearly a year before. It attributed the skyrocketing valuation to increases in players during the pandemic. “And since the company gets a 30% cut from the revenues generated by user-generated games, the company’s bookings for 2020 were $1.9 billion,” it said.

Craig Donato, Roblox chief business officer, said this will raise the visibility to the company. “Raising the profile of the company and supporting our recruiting efforts is a great thing. As you know, we have big aspirations for where Roblox can go. And one of the things that we need to make sure that we are able to do is really to step into that vision, and that requires a lot more people,” he said. “I think the unit economics and our business are strong, they have been strong and they’ll continue to be strong.”

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Donato said their inclination is to invest in long term success. “We are fortunate that our business has been cashflow positive for a number of years. Its nice to be able to raise some additional money to have an increase in the size of our cash reserves for investments that we want to make.”