If you’re a parent during COVID, there’s a high chance you’re subsidizing your sanity by funding your kids’ Robux in the virtual game, Roblox.

On Nov. 19, Roblox filed for its IPO with plans to list on the New York Stock Exchange under the ticker “RBLX”. This IPO is expected to debut in December, date TBD.

Unattended children will be spending Robux

Roblox, one of the most popular gaming platforms amongst kids and tweens, has been a big beneficiary of COVID — the longer kids spend at home, the more frustrated parents get and the more time kids spend on Roblox.

After 14 years of taking your money via your kids, the company is ready to take your money via an IPO:

• $588.7m in sales in the first 9 months of 2020, up 68% from the same period in 2019.
• 31.1m daily active users in the third quarter of 2020, nearly double from the same period in 2019.
• $203m net loss in the first 9 months of 2020, more than 4x its losses from the same period in 2019.

Roblox is going public at a time when the video game sector has gone through a year of tremendous growth — US consumer spending on video games rose 24% to $11.2b in 2020.

Not all fun and games – 2 big problems with Roblox

Sales concentration… The company stated that it makes nearly all its revenue from a small percentage of its users and through selling in-game currency, “Robux” — 29% of players are between the ages of 9-12.

These players are also likely moving on from Roblox as they age — a problem Roblox has tried to solve by engaging its older cohorts with an in-game Lil Nas concert.

Expensive to keep kids entertained… Roblox pays third-party developers, which make up ~26% of its expenses, to build in-game content. As Roblox continues to grow, it’ll have to continue paying out more developer fees — a costly way to grow.

For investors… Choose your avatar carefully

Unluckily for Roblox, its IPO comes at a time when positive vaccine data is cooling down stocks that have benefited from COVID. Investors could continue to move away from these stocks as the world moves out of lockdowns.

Investors will need to weigh the post-pandemic impacts on Roblox’s growth. The success of its IPO will depend on continued growth of its platform. Lastly, It’ll have to continue to grow while figuring out a way to turn a profit.

(Catch up: How are stocks being impacted by an impending vaccine?)