Roblox IPO in March 2021
You can now buy Roblox shares as it became a public company in March this year. It sold shares to the public via direct listing, and at the end of the week, it achieved a fantastic valuation of US $38 billion.
It vaulted to become one of the largest gaming companies in the world. Not bad for a 17-year old loss-making company in a highly competitive sector. Note this, just a year ago Roblox's valuation was a mere $4 billion. So it achieved a 10 fold increase in value in just twelve months.
The catalyst the drove Roblox's fortune is the pandemic. As children were trapped in their own homes because of the general lockdown, boredom drove them into online entertainment. Growth in users was huge in 2020.
The Roblos RBLX share price is currently 71.98 USD giving it a current market capitalisation of $39.62billion. Roblox shares are trading $5 lower than the 52 week high and $8 higher than the yearly low.
What is Roblox?
Roblox is an online gaming platform. It is one of the most popular gaming systems in the world.
According to the company, around 36 million users engage its system every day. A majority of them are young users. On top of this, around 7 million developers and content creators help to create new games within the Roblox system. This helps to improve, refresh, and update the Roblox experience over time.
A key thing about Roblox is its digital currency - 'Robux' - that you can use to transact within the platform. You use real-world money like USD or Pound Sterling to exchange for a certain Robux and use this Robux to buy things inside Roblox. Developers also earn Robux this way.
The Roblox digital 'metaverse' is hugely popular with children and young adults around the world. Roostermoney, a British pocketmoney app, surveyed how pocket money was spent by UK young adults last year. At the top of the spending list? Roblox.
Should you buy Roblox?
Roblox in valued as a high-growth company. Its gaming platform is groundbreaking and improving all the time and new users flocked into its games globally.
So bullish is its outlook that Cathie Woods of Ark Next Generation ETF (ARKW) bought 500,000 shares as soon as Roblox became public. The question for you is: Should you join the crowd?
Mind you, Roblox shares aren't cheap. The company has about $923 million in revenue and losses totalled $253 million last year. This year, the company expects to earn $1.5 billion.
Will Roblox pay a dividend?
There is no dividend on the table, unsurprising because the company needs to reinvest all its resources into growing the business.
Another risk of buying Roblox stocks now is that many economies are gradually opening up into the summer, such as the US and UK. A normalisation of the world economy means young adults are likely to spend more time outside than in front of screens.
However, if you believe in Roblox's gaming platform over the long term, buy the stock on pullbacks. This gives you a better entry price. Another way is to buy ETFs that hold Roblox shares, such as ARKW.
This Roblox share price chart shows the Roblox share price since IPO
Jackson has over 15 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.