Roblox raises $520 mio before direct listing
Kid’s online gaming company Roblox raised $520 million in a private financing round and announced that it will soon go public through a direct listing. Roblox filed to go public late last year but delayed its debut after DoorDash and Airbnb soared more than expected out of the gate. The company was initially set to go public through an initial public offering (IPO) but will now go through a direct listing.
First released in 2006, Roblox is going public following a period of dramatic growth as kids, who were forced to stay home during the pandemic, spent more time playing games.
Roblox allows users to create an avatar that they can move across titles. Games are free to play, and the company sells digital currency called Roblux that can be used to buy virtual goods and enhance characters.
The company’s revenue jumped 91% in the third quarter, from a year earlier to $242.2 million. Its daily active users almost doubled in the period ended September 2020 to 36.2 million. A metric the company calls “hours engaged” more than doubled to 8.7 billion.
Measurement firm Sensor Tower said that Roblox saw 159.6 million installs globally from across the App Store and Google Play in 2020, up 43% from a year ago, when it had 111.4 million installs in 2019. Last year, consumer spending in the mobile version of the game more than doubled from the previous year, reaching over $1 billion in revenue globally. In Sensor Tower’s recent report on holiday spending, it found that Roblox was the highest-earning mobile game in the U.S. this Christmas, reaching $6.6 million in gross revenue, up 40.4% from a year ago.
Like Spotify, Slack, and Palantir which all used direct listings, Roblox will let existing shareholders and employees sell stock to new investors on day one.
A direct listing is one of several ways companies are exploring to reach the public market as an alternative to the traditional IPO, which has been criticized as a handout to new investors at the expense of long-time insiders and employees.
Roblox sold its shares in a Series H funding round at $45 per share to Altimeter Capital and Dragoneer Investment Group. The company will use its proceeds to grow itself and build a “human co-experience platform that enables shared experiences among billions of users.”
The deal valued Roblox at $29.5 billion, an increase of more than sevenfold from its last funding in February 2020 when it raised $150 million in venture funding from Andreessen Horowitz. Its valuation at that time was $4 billion. According to its filings, Roblox indicated it plans to raise an additional $30 million.
The fundraising announcement comes just about two weeks after the SEC approved a rule allowing companies to raise primary capital at the same time as their market listing. Roblox, however, is raising capital before its listing.
The traditional IPO got disrupted in 2020, and companies now have a menu of options while going public, including the traditional IPO, a direct listing, or through a special purpose acquisition company (SPAC).
The variety of options presents many opportunities for companies, which is better for employees and it means a lot of fairer access to retail investors.
Roblox didn’t provide a timeframe within which it will file for registration with the SEC for a direct listing. But the deal is expected soon.