Probably not a name most people are immediately familiar with, Roblox nevertheless represents a great success story. Roblox Corporation is the developer of the immensely popular ‘Roblox’ computer game, which was estimated in 2020 to be played by over half of all children (<16) in the US.
First launched in 2004 under the name DynaBlox and switching to the current name a year later, Roblox allows children to play a range of open-ended games and interact with other players online via its chat functionality. In the last five years, the game has rapidly increased in popularity, both in the US and around the world. By offering an in-game ‘currency’ which allows users to purchase add-ons, as well as premium tiered access to the game, Roblox has generated very significant revenues from its daily user base of over 40 million. Despite this, the company is not yet profitable.
Roblox saw a large influx of new players during the COVID-19 pandemic as children across the world looked to socialize and play online rather than in person. To meet these demands, the company has expanded to a team of 500 engineers and support staff. Whilst experiencing rapid growth in use and revenue, Roblox has faced criticism for its ‘microtransaction’ business model, which has resulted in parents seeing unexpected bills for purchases made online by their children without their permission, as well as for inappropriate content being shared by users in the game.
In 2020, Roblox was the third most profitable game in the world and went public via a direct listing under the ticker ‘RBLX’. A direct listing differs from an IPO in that no new shares are created, but insiders can sell their holdings directly to the public, without using an underwriter. This minimizes costs and is increasingly common among tech companies. Shares began trading in March 2020 at $64.50 each, indicating a market value of $45.3 billion. A significant proportion of shares are held by investment management firms, particularly Tiger Global Management and Morgan Stanley Investment Management, alongside venture capitalists and retail investors.
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Currently, Roblox does not pay dividends to investors. Like many technology companies, Roblox reinvests its earnings into the company for growth and expansion into new ventures.
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