Roblox Switches to Direct Listing From IPO With Investment

(Bloomberg) -- Roblox Corp. intends to go public through a direct listing instead of an initial public offering as it earlier planned.

The online gaming company announced the switch on Wednesday, confirming an earlier Bloomberg report. Roblox also said that it raised $520 million through a series H private placement that valued it at $29.5 billion, according to a separate statement. The round was led by Altimeter Capital and Dragoneer Investment Group.

The funding will allow Roblox to go public without having to raise capital in an IPO. While the U.S. Securities and Exchange Commission has approved a New York Stock Exchange proposal to allow companies to raise capital in a hybrid type of direct listing, no company has tested that model yet.

Only a handful of companies have done direct listings, including Peter Thiel’s Palantir Technologies Inc. and music streaming service Spotify Technology SA. Neither raised any new capital in the listing.

Roblox had been working with Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. on the IPO, planning to list its shares on the New York Stock Exchange under the symbol RBLX.

In December, Roblox told its employees that it was delaying its IPO until 2021 to try to improve the process. The postponement came after staggering first-day gains in listings by Doordash Inc. and Airbnb Inc.

Making ‘Improvements’

“As such, we’ve decided to take this opportunity to work with our advisers to see how we can make such improvements,” Chief Executive Officer David Baszucki said in an email to employees last year.

Read more: Roblox to Delay IPO as Affirm Is Said to Weigh Its Timing

In a direct listing, a company typically doesn’t raise capital as it would in an IPO and investors don’t have to wait for a lockup period to expire before selling their shares.

Roblox, based in San Mateo, California, has seen its revenue and user base grow as the coronavirus pandemic kept students home and in search of entertainment. The company was valued at $4 billion in a $150 million funding round in February that was led by venture capital firm Andreessen Horowitz.

Roblox hosts millions of games that are built by its users, who then get a share of any related revenue. It says that two-thirds of all U.S. children 9 to 12 years old use the platform.

The company had 31 million daily active users during the first nine months of the year, up 82% from the same period in 2019, according to its earlier filings with the SEC. The amount of time those users spent engaged on the platform more than doubled from last year to 22 billion hours, the company said.

Usage of most video games has exploded with the coronavirus pandemic keeping millions -- including school-age children -- at home with time on their hands.

Birthdays, Concerts

Roblox has been expanding its focus to become a social platform, where users can come not just for gameplay but also to attend virtual birthday parties and concerts with friends. Amid school lockdowns, Roblox also has been increasingly used to teach everything from coding to physics.

For the nine months ended Sept. 30, Roblox lost $203 million on revenue of $589 million, compared with a loss of $46 million on revenue of $350 million for the same period last year, according to the filings.

The company’s investors include Altos Ventures, First Round Capital, Index Ventures, Meritech Capital Partners and Tiger Global.

(Updates with user statistics in 11th paragraph. The amount of the funding was corrected in an earlier version of this story.)

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