Source: Michael Vi/Shuttershock.com
By Ryan Chou and Seth Gellman
17 years after its inception, ROBLOX has gone public and released an initial public offering stock (IPO). Valued at nearly $40 billion, the company is certainly gathering some attention from investors. Led by CEO and co-founder David Baszucki, this video game platform has grown to over 800 employees and fosters million-player games, including “Adopt Me!”
On Wednesday, March 10, ROBLOX opened up with a stock valuation of $69.50/share. Since then, share prices are up a dollar to $70.50, but it wasn’t a gradual rise. In fact, ROBLOX actually peaked at a stock price of $77.00 on March 16th, but it went down from there. Although ROBLOX does appear to be a promising business with plenty of growth potential, that does not reflect how its stock will perform from here. Unfortunately, IPOs have a track record of volatility, with a failure rate of almost 90% and an almost guaranteed rise and crash in its early months. ROBLOX will likely be no exception; chances are, its current movement will continue into a crash. However, that’s not to say it won’t go up from there. In all likelihood, ROBLOX’s stock will safely and slowly build back up once the uncertainty currently surrounding it clears out.
As one of the most high profile IPOs of the year so far, many investors are curious as to how the game is doing in terms of popularity. According to Sensor Tower, ROBLOX was the most popular game of 2020, passing Candy Crush, which held the top spot for the previous three years. The video game platform recorded 32.6 million daily active users at the end of 2020, an 85% jump from the year before. According to the company, about 54% of users are under 13. In addition, they reported an 82% increase in revenue during 2020, reaching $924 million. The operating cash flow was reported at $524 million. However, ROBLOX reported a net loss of $253 million in 2020, according to the IPO filing. It also lost $97.2 million in 2018 and $86 million in 2019.
To increase profits, the company plans to expand across the globe to countries like Brazil, Germany, Russia, and China. ROBLOX’s joint venture with a subsidiary Tencent, the e-commerce giant, plans to release a localized version of the platform for Chinese users. This venture could be affected by U.S.-China politics, though.
After a few jumps in share prices in the first few days after the IPO, ROBLOX’s stock will likely stabilize as time goes on. The company appears to have the potential for very high profits with CEO Baszucki’s plans to expand worldwide and the endless opportunities that users can access in the game. Investors will be looking to see how ROBLOX expands and if their revenue and user activity continue to climb in 2021.