Roblox stock soared on its first day as a public company, closing a touch below $70 and valuing the gaming firm at about $38 billion. Assuming the stock stays that high, it means a very quick profit for venture capitalists who bought stock in Roblox’s last private fundraising at $45 a share in January. And that points to a flaw in the main argument advanced to promote direct listings, the route Roblox used to go public.
According to that argument, a direct listing—where a company lists its existing shares, without selling new stock—avoids the mispricing inherent in IPOs. Proponents point to the first-day pops we often see when a stock starts trading, soaring 50%-100% above the IPO price, guaranteeing a very fast profit for institutional investors who bought shares in the offering just the night before. IPOs are seen as leaving money on the table for the company.
