Roblox – IPO Note 2

[December 16th, 2020]

Background

Roblox Corp. delayed its planned IPO after company officials decided that the gravity-defying performance this week of Airbnb Inc. and DoorDash Inc. made it too difficult to determine the right price for the videogame company’s shares.

Dec. 11, 2020 WSJ

Affirm Holdings Inc. is postponing its initial public offering, according to people familiar with the matter, the second company in as many days to pull back from the red-hot IPO market.

The move comes just a day after The Wall Street Journal reported that videogame company Roblox Corp., which was on a similar IPO timetable, put its listing on pause until early next year.

Dec. 12, 2020 WSJ

Note

It’s very common that hot IPOs have massive pop at their debut. The pros and cons between different going public mechanisms have been widely discussed and it’s understandable that companies decided to do last minute market timing for their stakeholders’ interests.

The impact on sentiment from these signaling might change the price behavior of certain “high-valuation” stock. It might take time to digest the impact or the impact might be permanent for those already listed stocks. It will be very interesting to see how these market timing activities end up (how successful they capture the money left on the table? don’t worry, there will be someone to do the math lol).

The moment you think your stock is underpriced, participants start thinking your stock is overpriced. The sentiment might stay for an extended period after listing. The setup becomes not very attractive at the moment.

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