There is something about companies which has caught the attention of the media in the last few months. This is the fact that most of them have decided to go public. Roblox is one of such companies. Right now, there is a lot of news about its decision to go public. This is one headline that is expected to interest potential investors given its reported worth ($38billion).
An overview of Roblox
Roblox is a company that is specialized in the development of video games. It was founded in 2004 through the genius of Erik Cassel and David Baszucki. This is one the few companies which have managed to revolutionize the video game industry. Roblox is a platform online where people are given the rare chance of exploring different games of their choices. This company has managed to master the art of developing different high profile games which can be played online by children all around the world.
Roblox as a company seems to be waxing stronger by the day. This is evident in the fact that its number of staff was almost 1,000 as of December 2020. From all indications, it is very obvious that the company is prepared to compete with some of the heavyweights in the gaming industry in the nearest future. For instance, it presented a report claiming that 19% of children who live in the United Kingdom within the age of 7-9years are exploring its online gaming platforms.
As a matter of fact, it has been reported that millions of children in the UK make use of this platform on a regular basis. As compared to games like “Minecraft” and “Fortnite”, which have succeeded in making headlines over the years, Roblox isn’t that popular. However, having a platform that is explored by over 100million people all over the world within 30 days isn’t bad at all.
Roblox isn’t just one game. Instead, it is a collection of different games which have been developed by players who are members of its community. For the sake of simplicity, Roblox platform can be compared to YouTube where videos are being created and uploaded by millions of people on a daily basis. The difference is that for Roblox, games are being developed for people to play online rather than videos. The Roblox application can be downloaded on various devices like PC, smartphones, gaming consoles and more.
Roblox has been able to come up with some unique features in order to stand out from the crowd. For instance, there is the availability of social features which enables kids to chat with friends from various locations and countries without any limitation.
In the UK, Roblox (24%) is almost as popular as Instagram (25%). The only platform that seems to be more popular amongst kids within the age of 7-9years is YouTube (45%). However, it is steps ahead when compared with popular TV programs for kids like Cartoon Network (8%), Nickelodeon (10%) and CBBC (11%).
Robloxs performance in the stock market so far
At the moment, it can be said that Roblox isn’t doing bad at all. Don’t forget it was mentioned that this company was ready to compete with some of the heavyweights in the gaming industry. The suggested price for a share was supposed to be around $45. This is the price set by NYSE (New York Stock Exchange). However, its first day in the stock market showed that the future really looks bright for investors. For instance, from $45, its stock increased to $69.50. This was an increase of over 50%. The second day, it closed at $73.90 after experiencing an increment of 6.3%.
The company decided to choose the option of direct listing whereby there will not be creation of any new share. The idea is to allow current investors to sell their shares which are already existing. This is going to be based on the law of demand and supply in the stock market.
Furthermore, it may interest you to know that Roblox is the first direct listing of the year 2021 even though other companies also decided to explore the same option. These are Coinbase, Asana (ASAN) and Palantir technologies. Through the option of direct listing, it is expected that Roblox would have incurred less expenses since banks would not be involved in helping to market its shares. In this case, banks are supposed to play the role of underwriters. However, with direct listing, they have been eliminated from the chain.
According to experts, one of the reasons which must have prompted Roblox to choose such an option is its popularity amongst kids and parents. For instance, ever since its release in 2006, it has been growing in terms of popularity. Even during the lockdown, its number of active users were reported to have increased up to around 50million. At such point, creators of video games that were using its platform also increased to over 5million. At the moment, Roblox is claiming that its number of active users is over 100million on a monthly basis. Given the extent of its popularity, the management probably didn’t see any need to use underwriters like banks and other third parties when it comes to listing its shares.
In other words, the company’s reputation was solid. It is a platform that people are using widely at the moment. Therefore, potential investors already understand how the company is generating its profits on a yearly basis. Bringing in underwriters is similar to a white elephant project as the company will be spending unnecessarily. Apart from having a strong brand identity which Roblox has been known for, its business model is quite easy to understand. Also, it can be said that the company isn’t in need of a huge amount of additional capital.
More about the impressive performance
The growth of Roblox can be traced to the pandemic period in 2020. This gave people the chance of learning more about the company and exploring its gaming platforms. In the UK alone, it boasts of over 2million active users. These are kids under the age of 12 who explore its games on a monthly basis. In the US, reports are claiming its subscriber base is over 160million. These are kids under the age of 16.
The company has raised funds through different means in the past. For instance, $560,000 was raised in a fundraising effort in 2005. Again, $150million was raised in the early periods of 2020. At the moment, the company has an estimated valuation of around $29.5billion. Based on all these, experts are predicting it won’t have any problem outperforming others in the stock market. You can bet that their predictions have been spot on. This is because at the moment, the price of Roblox share is $67.30.
What does this mean for potential investors?
If you have always fancied your chances of investing in the video game industry, there is no doubting the fact that Roblox is offering you the chance to do such. Below are some of the reasons why you shouldn’t let this opportunity pass.
An ever growing market
The video game industry is evergreen. Roblox has been able to achieve a feat which most companies are struggling to achieve all these years. This is ensuring video games can be played on-the-go. In other words, video games can be played online. Gone are those days when people explore their favorite games via gaming consoles. It means they have to visit local stores and supermarkets to get games. All of these have changed as Roblox is beginning to make most games available online. Subscribers only require internet connection and they are good to go. It can be said that the emergence of this company has been timely given that we are in the digital era.
Impressive revenue growth
Roblox has been able to enjoy revenue growth. These have caught the eyes of potential investors over the past year. For instance, in 2019 it generated around $488.2million. It may interest you to know that this was due to a growth of over 50% experienced in 2018. Furthermore, it enjoyed growth of 68% from January to September 2020. According to experts, this was because of the impact of the pandemic where most people had to remain in their homes. The amount generated within that period was $588.7million.
Final thoughts on Roblox IPO as an investment
The video game industry is one that will always remain competitive. This is because games and companies are coming out every year. However, there is every reason to believe that Roblox has managed to stamp its authority, thereby having its brand established in the mind of both potential and existing investors. Overall, you will see that this is one of the most profitable investment options to explore.
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