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Source:MaximP.Shutterstock
Summary
- Roblox shares (NYSE:RBLX) opened at US$64.50 apiece, before settling at US$69.50.
- Based on the opening trade, the California-based company is valued at US$42 billion.
- Founded in 2004, the company offers a range of online gaming products for its users.
Shares of virtual gaming platform Roblox Corporation (NYSE:RBLX) surged 54 per cent after its debut via a direct listing on the New York Stock Exchange (NYSE) on Wednesday.
Its initial listing price was US$45. The stock opened at a premium of $64.50, before settling at $69.50. It had hit a high of $74.83 during the session.
Based on the opening trade, Roblox is valued at US42 billion.
Why is everyone talking about Roblox?
Founded in 2004, the company initially had only seven hundred people as its user base and over the years it has grown up to 36 million users. These users play and interact with each other daily, making Roblox not only a gaming platform but a social networking site as well.
The company operates through two business models –one is the platform where developers and gamers build and play games. And the other model is based on users inviting their friends and so on, which is helping the company to grow its user base in millions. Roblox is managing to attract new customers and retain the old ones, who also spend a lot of money for buying the gaming platform's currency –Robux used to upgrade game avatars by buying clothes, accessories, and skills.
Pic Credit: Pixabay.
What is the company's revenue model?
The major earnings come through user spending at the company gets a 30 per cent cut on that. Roblox also gets a commission if the developers' covert Robux currency into real dollars. Notably, this revenue model is working for the company as its revenue grew up by 56 per cent in 2019, clocking the figure of US$ 488.2 million. In 2020, its revenue grew up at a faster pace (68 per cent), making the revenue reach the figure of US$ 588.7 million in just the first nine months of the year.
What's the takeaway?
- Since the gaming platform is suitable for children who are under the age of 13, it is expected that daily active users (DAU) will keep growing. It provides its users with an opportunity to create video games even if they have no idea about coding. The company's prospects boosted after the pandemic as it has made people accustomed to engaging in activities like playing video games, relying on OTT platforms among other indoor activities.
- Instead of opting for a regular IPO, the company chose DPO, meaning it wants to give a fair opportunity to retail investors. In IPOs, stocks are mostly available to institutional investors before they surface at inflated prices in the market.
- The company's previous value was US$ 29.5 billion. It has grown from US$2.5 billion in 2018. Its persistent growth over the years makes it a worth riding on.
