Roblox closes at $ 38 billion valuation on day one of trading

Shares of Roblox, the online games company with a large number of tweens, made solid gains as they started trading on the New York Stock Exchange, in the largest direct listing of a tech company to date.

The company’s stock price ended at $ 69.50 after opening at $ 64.50, giving it a market cap of $ 38.3 billion. Its share price was more than 50% higher than this private investors have paid for Roblox stock in a $ 520 million fundraiser in January.

Investors were watching Roblox’s listing closely to confirm their interest in companies looking to build the so-called metaverse, a virtual universe where people spend time as they would in the physical world.

Private investors valued Epic Games, another company associated with the metaverse, developer of Fortnite, at $ 17.3 billion last year after funding nearly $ 1.8 billion.

“We see strong international growth ahead of us,” said Mike Guthrie, Chief Financial Officer of Roblox. “We are far from finished, even though we are in 180 countries around the world.”

Public investors have recently been willing to discount large losses in favor of fast-growing business models, sending new listings higher when they start trading.

Based in Silicon Valley, Roblox is home to over 18 million user-developed virtual worlds where people go to play games and interact with friends. The company makes money from the sale of a virtual currency, Robux, which can be used for in-game purchases.

Users flocked to Roblox during the pandemic, spending around $ 1.9 billion on Robux last year, almost three times the level of 2019. The company paid nearly $ 329 million to developers and other creators. Last year.

Roblox recognizes revenue on a deferred basis, an unusual practice that drew close scrutiny regulators and led the company to restate its income. He warned this month this growth will slow in 2021, as the number of hours users spend on the platform is expected to decline by 11% in the second quarter.

Analysts said Roblox may experience volatile trading due to a high level of interest from users and other ordinary investors.

“High volatility looks likely for a while. . . In our discussions, most professional investors believe that this name will generate significant retail interest, without too many price constraints, ”Bernstein analysts wrote in a research note.

Investors surveyed by Bernstein said they would pay up to $ 59 for Roblox shares on average, with responses ranging from $ 30 to $ 108.

Roblox goes public through a direct listing, skipping the usual fundraising process associated with an initial public offering and allowing a portion of its shares to become tradable.

The company originally planned for an IPO in December, but changed course after chief executive David Baszucki said he wanted to improve the process for employees and investors.

Direct listing allowed investors and other insiders to cash in some of their shares immediately. Roblox has registered up to nearly 200 million shares, or about 36% of the company, which will be available for trading from Wednesday.

Altos Ventures held the largest stake in Roblox, worth $ 8.1 billion based on early deals. He recorded a tenth of that amount for trading.

Baszucki, with a stake of nearly $ 4.6 billion, held 70.1% of the company’s voting rights. His brother Greg Baszucki, who sits on the board, also owns shares worth nearly $ 1.1 billion.

Goldman Sachs and Morgan Stanley advised Roblox on the list.

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