Roblox, a popular online platform for game creation and user interaction, recently went public on the stock market. Last Wednesday, Mar. 10, Roblox Chief Executive Officer David Baszucki rang the famous bell to begin the trading day of the stock market, officiating the first day of the new initial public offering.

The company, through suggestions from Goldman Sachs and Morgan Stanley, had a set IPO price of 45 dollars, an expectation it would quickly beat after opening at 60.50 dollars mid trading day. Market capitalization is the value of a public company calculated by multiplying the outstanding shares by the stock price. This means Roblox beat its market capitalization by more than 10.1 billion dollars on its opening alone.

IPOs are generally executed to raise capital for growth or to pay off debts the company may hold. In Roblox’s case, although exact fundamentals are unknown until the first quarterly reports are released, it is known that the company has over 292 million dollars in free-flowing cash.

Before the IPO, Roblox held a private financing round led by Altimeter Capital and Dragoneer Investment Group that gave the company another 520 million dollars to fund further growth. The company has also seen a jump in revenue from 349 million dollars in 2019 to over 588 million dollars in 2020, a year-over-year growth of around 68 percent. At the same time, daily active users have seen an 82 percent rise, year over year, to roughly 32 million per day.

“I used to play Roblox myself with some friends when I was younger. All the different game modes, even back then, was very entertaining to play. It is funny to see how the company has matured over time and how it is now gone public,” sophomore Justin Bohanan said.

The online gaming platform was created in 2003 by David Baszucki and Erik Cassel, originally known as Dynablocks, until it was renamed in 2004 to be more famously known as Roblox. At that time it was still in a beta version, only to be released for the first time on Sep. 1, 2006 to the public. Different conventions are what jump-started the game’s popularity until April 1, 2012, when the site had to be taken down after cyber attacks displayed inappropriate messages and banners on the platform.

With the creation of Roblox and “The Builders Club,” Roblox was able to capitalize off the willingness of users to pay for the increased services, eventually attracting more and more players, which ultimately led to the profitability it faces today. With the advent of a mobile app across all operating systems, the company was able to reach an even younger demographic, again leading to the rapidly boosting sales, becoming the second-highest grossing game on iPhone Operating System.

COVID-19 has helped boost active daily users for Roblox. Having shut down schools and extracurricular activities, kids have more time to spend online. This was seen in the fact that from Feb. 2020 to March 2020, the company saw a 40 percent rise in users. The iOS version of Roblox trails only Youtube as the biggest money maker, expecting around one billion dollars from in-app purchases alone.

While the company faces large profit streams, Roblox is not the only benefactor. The online platform is composed of many different games users can play, built by the in-game elements, ranging from car racing to first-person shooters. These game modes are made by independent game developers that are paid by Roblox based on the engagement time of premium Roblox subscribers.

In 2019, these game developers were paid 110 million dollars. In 2020, that was up to 250 million dollars. During June alone, these developers were paid two million dollars as part of the Premium Payouts program. These server owners can expect anywhere from 420,000 dollars a year if they find their game on the top 100; the number one game averages roughly 10 million dollars a year. A cut of these revenues, however, does go to Roblox as part of the server agreement between the developer and corporate.

“Roblox was a really fun game to play with my friends, with all the different games to choose from. To see the company now go public and become a very profitable business is almost funny in a sense. It is also very cool to see how much Roblox gives to game developers every year,” sophomore Marcos Algeciras said.

As the stock met its first week of trading, it was up more than 54 percent to 69.50 dollars and rose another 6.3 percent on Thursday, March 11, closing at around 73 dollars. This performance means it closed at a market capitalization of around 39 billion dollars. As the Roblox stock matures and patterns emerge, it will become clear in what direction the price of the new security will head.

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