Here’s What You Need to Know Heading into the Roblox IPO

The Roblox IPO is likely to hit the markets sometime in December. The company, which operates a massive online gaming platform, is expected to raise over $1 billion.

An illustration of the Roblox game is displayed on a smartphone screen.

Source: Miguel Lagoa /

The origins of Roblox go back to 1989 when David Baszucki and Erik Cassel started Knowledge Revolution.

At the heart of this was a computer program called Interactive Physics, which allowed for the creation of 2D simulated labs.

This application was a big hit and many students around the world used it to understand things like what would happen if two cars  collide or a home fell apart.

Both Baszucki and Cassel would eventually sell Knowledge Revolution to MSC.Software, a top engineering simulation software company, and they would take senior positions at the company, leaving in 2004 to start Roblox .

The underlying algorithms of Interactive Physics was crucial. But the goal was to make the system 3D and highly immersive.

Note: Cassel died in 2013 from a long bout with cancer. He was only 45.

Background on the Roblox IPO

Think of Roblox as a virtual world. With sophisticated tools, it is fairly easy for people to create online experiences but also share these with others.

Here are some of the key elements:

  • Identity: Every user has a unique identity that is in the form of an avatar. The identity can have different shapes, clothing, gear, gestures, emotions and so on.
  • Immersive: The Roblox Studio makes it possible to create realistic 3D environments. The technology uses low-level hardware-specific device APIs to provide much better rendering.
  • Channels: Roblox is available across platforms like Apple’s (NASDAQ:AAPL), iOS, Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) Android, Windows, Mac, Microsoft’s (NASDAQ:MSFT) Xbox as well as VR headsets from Facebook’s (NASDAQ:FB) Oculus Rift, HTC Vive and Valve Index.
  • Ecosystem: Robox has the Robux virtual currency, which allows for transactions. There is also a conversion to real-world currencies.

Now, when it comes to the Roblox IPO, one of the critical factors is the traction. The good news is that growth has remained particularly strong.

On a daily basis, about 36.2 million people engage with Roblox and the number of hours of usage on the platform jumped by 122% to 22.2 billion for the first nine months of this year. The community of developers is close to seven million and they have created over 18 million experiences.  In terms of the revenues, they spiked by 68% to $349.9 million this year.

But there are certainly risk factors for the Roblox IPO. First of all, the majority of the users are kids and yes, they can be fickle. Even though Roblox’s model for allowing creative development has worked quite well, it will not be easy to maintain the engagement.

Next, with the Covid-19 pandemic likely to recede next year because of the new vaccines, this may result in lower traffic as kids will be back in school and also engage in other activities.

Bottom Line on Roblox

The terms of the public offering have not been set (this should happen in week or two). But it does seem like a good bet that the IPO will get a strong reception from investors. After all, the markets have remained extremely bullish, especially for fast-growing tech operators.

It’s also important to note that another top gaming company, Unity (NYSE:U), has recently come public. So far the shares have gained about 133%.

As for the Roblox IPO, the company plans to list on the NYSE exchange under the ticker RBLX and the lead underwriters include Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), J.P. Morgan (NYSE:JPM), Allen & Company, Bank of America (NYSE:BAC) and RBC Capital Markets.

On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling.  He is also the author of courses on topics like the Python language and COBOL.

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