Send me real-time posts from this site at my email

Why Roblox Stock Skyrocketed Today

What happened

Shares of Roblox (NYSE: RBLX) soared 54% on Wednesday, marking a successful first day of trading for the popular video game developer.

So what

Roblox went public via a direct listing, rather than the traditional initial public offering (IPO) process. A direct listing allows a company's existing investors to sell shares directly to the public, without the need for an investment bank to underwrite the offering.

"We love the direct listing for Roblox because we're all going to come together and that first trade is going to be at the same price for everyone," Baszucki said during an interview with Bloomberg Television.

Roblox's shares soared during its stock market debut. Image source: Getty Images.

The New York Stock Exchange set a direct listing reference price of $45 for Roblox's shares. That valued the game developer at $30 billion -- a steep increase from the $4 billion valuation investors assigned to the company in a funding round in February 2020. Still, investors apparently thought Roblox's shares were worth much more, and they bid their price up another 54% on Wednesday.

Now what

Roblox has enjoyed tremendous growth during the coronavirus pandemic, as parents sought out safer forms of entertainment for their children. More than 8 million developers use Roblox's tools to design 3D virtual experiences for the platform's 37 million users. The company's revenue, in turn, rocketed 82% to $923.9 million in 2020.

Looking ahead, Roblox sees its revenue rising as much as 64% to $1.5 billion in 2021. However, it cautions that growth could slow as the COVID-19 crisis subsides and children have more forms of entertainment available to them once again.

"We headed into 2020 with strong organic growth which was further bolstered by social distancing restrictions," chief financial officer Michael Guthrie said on March 2. "As those restrictions ease, we expect the rates of growth in 2021 will be well below the rates in 2020."

10 stocks we like better than Roblox Corporation
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Roblox Corporation wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 24, 2021

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue