Roblox online game service.
Lionel Bonaventure | AFP | Getty Images
Roblox has postponed plans to go public because of scrutiny by the United States Securities and Exchange Commission on how the video game platform recognizes 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 anticipated debuts in the US public market in 2021. The company had said in a regulatory document earlier this month that it intended to list shares on the New York Stock Exchange in February.
Roblox’s valuation skyrocketed to $ 29.5 billion in a fundraising round earlier this month, more than seven times the $ 4 billion assessed by the company 11 months earlier, amid an increase in the popularity of video games during the COVID-19 pandemic.
The SEC has reservations about how Roblox recognizes 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 that last for a period of time and consumer goods that are used immediately. Roblox sought to treat all revenue in the same way and amortize it over the duration of its paying user accounts, which is about two years.
The SEC wants Roblox to be more specific and recognize revenue from consumable products as they are consumed, while durable services will still be recognized throughout the life of the Roblox user, the memo said.
“By adopting this accounting position, our revenue will actually be slightly higher, while reserves, DAUs (daily active users), hours of engagement and cash flow will not change,” wrote founder and chief executive David Baszucki in the memo to Roblox employees , whom he referred to as “Robloxians”.
“It will, however, take some time to update this change in our financial statements,” he said.
A Roblox spokesman declined to comment.
This is not the first delay in listing plans. Roblox told employees in December that it postponed the listing until 2021 as it worked with consultants to improve the process to benefit employees and investors. The company eventually changed the subject and said it would go public through a direct listing instead of an initial public offering (IPO).
Roblox’s revenue – based on its previous metric definition – jumped 68% to $ 588.7 million in the first nine months of 2020. The company reported a net loss attributable to ordinary shareholders of $ 203.2 million compared with $ 46.3 million a year earlier.
Roblox, which is among the most popular children’s game sites in the world and offers a range of games on mobile devices and game consoles, said its daily active user base has increased 82% to 31.1 million in the nine months ended 30 September of the same period a year ago.
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