Roblox Hits a Roadblock

The IPO has never been hotter.

But some companies have decided to delay their offerings. Roblox, the high-growth video game company, has decided to delay its IPO.

Roblox Backdrop

Roblox operates a free-to-use online gaming platform and “game creation system” where users program their own games. The company generates revenue when players make in-game purchases with virtual currency.

The pandemic has created the perfect environment for Roblox to thrive. In the first nine months of the year, daily active users surged to 31 million, up 82% vs. 2019. That trajectory made Roblox one of the most eagerly-anticipated IPOs of the year:

And investors have been receptive to new technology offerings:

• On Wednesday, food delivery app DoorDash spiked 84% on its first day of trading. It is now worth more than Chipotle, Dominos, and Dunkin’ combined.
• Airbnb booked a trip to the moon, climbing 113% on Thursday after pricing its IPO above the expected range.

Putting It In Perspective: For IPOs that raised >$1 billion, Airbnb and DoorDash rank #4 and #6 of the largest first day “pops” in history. The top three each came in the year 2000, just before the dot-com crash. The largest IPO pop of this size cohort was for Palm (the maker of the PalmPilot mobile device, which can now be found in the Smithsonian).

Roblox Audible

With so much investor enthusiasm, and an environment which some have called “frothy,” it may seem like an odd time to postpone an IPO.

According to the WSJ, Roblox is concerned the volatility has made it difficult to know how to properly set an IPO price.

Leaving Money On The Table: While the IPOs of Airbnb and DoorDash were, in many respects, successful, the companies seemingly left money on the table. If the two respective IPOs had been priced higher (all-else equal):

• DoorDash could have raised another $2 billion and still have had a strong 20% first-day pop.
• Airbnb could have raised another $3.5 billion and achieved a 20% pop.

With so much volatility, Roblox CEO David Baszucki said “Based on everything we have learned to date, we feel there is an opportunity to improve our specific process for employees, shareholders and future investors both big and small.”