Roblox stock market listing delayed amid SEC scrutiny

by Jonathan Adams

Roblox’s valuation skyrocketed to US$29.5 billion in a fundraising round earlier this month as the popularity of video games surged during the Covid-19 pandemic

Roblox Corp has postponed plans to go public because of the US Securities and Exchange Commission’s (SEC) scrutiny of how the video game platform recognises revenue in its finances, according to a memo the company sent to employees on Thursday.

The delay is a setback for one of the most eagerly anticipated US public market debuts of 2021. The company said in a regulatory filing earlier this month that it was aiming to list shares on the New York Stock Exchange in February.

Roblox’s valuation skyrocketed to US$29.5 billion in a fundraising round earlier this month, more than seven times the US$4 billion the company was valued at 11 months earlier, amid a surge in the popularity of video games during the Covid-19 pandemic.

The SEC has reservations over the way in which Roblox recognises revenue from the sale of its currency, Robux, on its platform, according to the memo seen by Reuters.

Players use Robux in the game to buy a mix of durable goods which last for a period of time and consumable goods which are used immediately. Roblox had looked to treat all the revenue the same and amortise it over the duration of its paying user accounts, which is around two years.

The SEC wants Roblox to be more specific and recognise revenue on consumable products as they are consumed, while the durable services will still be recognised over the life of the Roblox user, the memo said.

By adopting that accounting position, our revenue will actually be a bit higher, while bookings, DAUs (daily active users), hours of engagement, and cash flow will not change, founder and chief executive David Baszucki wrote in the memo to Roblox staff, who he referred to as “Robloxians”.  It will, however, take us some time to update this change in our financial statements.

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