Thread by @mariodgabriele

$RBLX IPO is going to go *nuts* tomorrow.

After 2 delays, the gaming metaverse is finally listing. It could lock in the biggest pop yet.

Why?

↓↓

readthegeneralist.com/briefing/roblo…

h/t @ckurdziel @alice__LG @pinchedforgrowf @eric_seufert @brettbivens @dburben @nosreffeJtnayrB

Disclaimer: you should always do your own research. This is not investment advice, just sharing my thoughts based on digging deep into the business with some other smart folks.

#dyod

TL;DR

I think Roblox is going to be a generational business. Key reasons:

- Has a built-in economy
- Insane viral loops
- Free cash flow is off the chain
- Growing rapidly and monetizing well
- De-risked China

Let's walk through each.

1. Economy

Roblox monetizes by selling "Robux," an in-game currency. Players use Robux to pay for new experiences or avatar gear.

Like these dope swords, glasses, or hairstyles. This is pretty radical — its a true economy that Roblox controls (and that sees high volume).

2. Virality

Roblox is fundamentally social. It is not just a place to play games, it's the place you meet and make friends.

Virality is similar to a social network. You invite your friends to join you.

The upshot: $RBLX owns the social graph for a generation.

3. FCF

Roblox has great free cash flow.

Why? An example...

- A player buys $100 of Robux
- They spend it on "Mario's Trill Hat" for their avatar
- Mario keeps my earnings in Robux
- Mario spends it on Jon's "Dope Headress"

Roblox has that $100 but hasn't had to pay it out.

4. FCF/Float

This basically gives Roblox a "float." @gilbert does a great job summarizing this.

https://twitter.com/gilbert/status/1361491723965239296

5. Growing fast + making paper

We talk about this in detail in the briefing, but basically: look at "Bookings" not "Revenue."

Bookings grew *171%* YoY, reaching $1.24B for the first 9 months of 2020.

This link jumps straight to "Financials" ↓

readthegeneralist.com/briefing/roblo…

6. De-risked China

Asia makes up 48% of the world's gamers. It's important for Roblox to try and own China.

Good thing they partnered with Tencent. In December, Roblox secured licenses to operate in the country.

Huge.

7. Bear case?

This has been a fairly effervescent thread. That's a reflection of how I feel about the company, but there are always risks.

Would you want to hear the bear case?

Net/net:

This is an IPO worth watching. Even if it doesn't make sense to invest on the day, I think Roblox has every opportunity to be a business on the scale of $FB with enough time.

Read on (for free) here ↓

readthegeneralist.com/briefing/roblo…