Roblox made $ 45 billion on the first day of trading as the game exploded

When the pandemic forced people to stay indoors a year ago, many people passed through time by playing games on iPhone, building gaming PCs and exploring the latest blockbuster titles on Xbox and PlayStation.

For video game companies, that means money-makers. According to NPD Group, a record $ 56.9 billion was spent on games last year in the US, up 27% from 2019. Sony, which released the PlayStation 5 in November, recently reported profit increased 62% while Microsoft saw $ 5 billion in quarterly gaming revenue for the first time, thanks to sales of its new Xbox devices.

On Wednesday, the pandemic’s explosive effect on games was even more evident when Roblox, a games platform aimed at children, hits the public.

The Silicon Valley company closed its first trading day at $ 69.50 a share, up from its $ 45 reference price set on Tuesday. That values ​​Roblox at $ 45 billion, up from $ 4 billion just over a year ago. The company has listed shares directly in which no new shares have been issued.

“The gaming industry is swimming in the cash,” said Joost van Dreunen, a professor at New York University who studies the video game business. “It’s just pouring money into these people, into these companies.”

Roblox’s performance is another sign that the public offering is hotter. When Airbnb and DoorDash went public last year, their share prices skyrocketed, questioning whether there were new stock market bubbles. Investor demand for the young, fast-growing companies was so off the charts that Roblox decided to postpone listing in December because it was too difficult to accurately value its stock.

That hype has been associated with Roblox by a general euphoria towards video games. In addition to the new game consoles from Microsoft and Sony last year, mobile games like Among Us have become an internet phenomenon basically overnight. Video game makers like Take-Two Interactive and Electronic Arts tried to outbid each other in order to acquire smaller competitors. “Hundreds of game startups have sprung up during the pandemic,” said Evan Van Zelfden, chief executive of Games One, a consulting firm.

“It looks like there’s a new startup getting funded almost every day,” he said. “Everyone wants to be the next Roblox.”

But how long that madness can last is increasingly questioned. With vaccinations in place and pandemic restrictions loosened in some places, gaming behavior could begin to change. Investors are not thinking about what will happen when the pandemic subsides, van Dreunen said.

“There will be less time to play Roblox,” he said.

David Baszucki, chief executive and founder of Roblox, said in an interview Wednesday that he did not expect the platform to bleed players once the pandemic ends and kids return to play with friends outside.

“We don’t think we’ll lose all of that, or all the great people we’ve gathered,” he said. His shares in the company were valued at around $ 5.5 billion by the end of the trade.

Roblox was founded in 2004 by Mr. Baszucki and Erik Cassel, who are engineers and entrepreneurs. (Mr. Cassel died of cancer in 2013)

The website, released in 2006, is an online universe in which players can interact and choose from over 20 million unique games. They can then use their avatars to escape prison, explore the rainforest or adopt pets, among other things. Players pay premium membership, as well as items and clothing for their avatar, with a digital currency called Robux.

Over the years, Roblox slowly gained in popularity with a younger audience. That growth was enhanced last year by the pandemic. The company says an average of 32.6 million people log into Roblox every day, almost double the 2019 average of 17.6 million. While Roblox was unprofitable, its revenue jumped 82% to $ 924 million last year.

Over the years, Roblox has raised $ 871 million in funding. Its largest investors include Altos Ventures, Index Ventures and Meritech Capital Partners.

Roblox has also enriched many of the developers, the creators of their digital games and accessories, and those who split their profits 50-50 with the company. The creators of the most popular Roblox games can earn a six-figure salary. Many of the developers are teenagers and young adults growing up on this platform.

One developer, 21-year-old Anne Shoemaker, said she has made more than $ 500,000 from the platform, largely since the pandemic started. She used some of the money to hire two employees and dozens of contractors, she said.

The success fueled by the pandemic, she said, was “the drive I needed to make Roblox my full-time job.”

After delaying its listing in December, Roblox is reportedly set to go public in January. But it pushed back that day after the Securities and Exchange Commission asked the company to change its revenue calculation. Roblox has complied since then.

At an investor event last month, Craig Donato, the company’s chief business officer, said Roblox is trying to add more users, largely by attracting an international audience and players. old. The company is also working towards more slick graphics, more complex games, and increasingly lifelike avatars, he said.

The ultimate goal, the company says, is to create a “metaverse,” a concept primarily for science fiction that depicts a shared online universe where people can live and interact like maybe they are there directly. Roblox holds business meetings on the platform and has promoted virtual concerts in its universe.

On Wednesday, Roblox employees also gathered their avatar inside a digital version of the New York Stock Exchange to commemorate the listing.

“Just as mail, telegraph, phone, text and video are all utilities for collaborative work, we believe that Roblox and metaverse will join these utilities as essential tools for communication. business, ”said Mr. Baszucki during the investment festival. “Finally, one day, we might even shop in Roblox.”

But before the metaverse can happen, Roblox will have to navigate what to do when a pandemic breaks out.

David Gibson, chief investment officer at Astris Advisory, a financial consulting firm in Tokyo, said: “A large part of their 2020 performance in terms of revenue is with respect to Covid, in particular. is in America. But he said he wondered how long that would last.