Are Roblox Investors Taking Outage Seriously Enough?
(Bloomberg Opinion) -- When Roblox Corp., the popular video-game platform that started trading publicly last March, went offline for three days at the end of October, it generated a wave of criticism on Twitter and elsewhere. Kids, including my son, who spends more time on the platform than I’d care to admit, were left to ponder what to do with their free time going into Halloween weekend.
When the company finally announced just after 7 p.m. on Oct. 31 that the platform was back online and published a post on its blog with additional details from co-founder and chief executive officer David Baszucki, it almost didn’t matter that it was prime trick-or-treating time, at least on the West Coast. There were three days of gaming to make up for, fueled by lots of newly acquired candy.
Still, I can’t help but wonder about the disconnect between the platform’s outage and the enthusiasm of investors over the past few weeks. Three days is an unusually long time for a major technology platform to be down, let alone one that has been publicly traded for less than a year. For example, Meta Platforms Inc., formerly known as Facebook, was down for seven hours at the beginning of October. Since the outage, Roblox’s stock has climbed about 50%, largely on strong third-quarter earnings that Roblox reported on Nov. 8. Could this be just another sign of investors turning a blind eye to a potential problem?
To be fair, the company seems to be taking the right steps to reassure its investors. In a shareholder presentation that accompanied the earnings, the company noted that “those 70 hours were difficult for our users and the millions of Roblox creators, many of whom generate their primary source of income from Roblox” and pledged to compensate them for income lost during the downtime. The company estimated that the lost revenue from bookings was about $31 million and that the earnings loss for its developers during those three days was $6.8 million.
The outage caused the company to add language to its risk factor on the impact of outages and downtime when it filed its 10-Q on Nov. 9. Indeed, the company mentioned the word outage 11 times in the most recent 10-Q, compared with just six times in the first 10-Q that it filed in May after going public. In earlier filings, the company noted that it typically experienced one outage a year but did not provide any details on whether the October outage was longer or more serious than previous ones. The company did not respond to a request for comment.
Clearly the company knows how serious any downtime is. In both his blog post and in a presentation to investors on Tuesday that lasted more than five hours, Baszucki mentioned “the very unfortunate outage” and promised to provide additional details in a post-mortem that he said the company will make public. In his blog post, Baszucki described this as part of the company’s five core values, which include “respect the community.” He also noted during the presentation the “huge responsibility to be live all the time.” That’s particularly true now that the company is publicly traded. Simply put, the stakes are much higher now.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Michelle Leder is an expert on SEC filings, having launched her site, Footnoted.com, in 2003 after writing the book "Financial Fineprint: Uncovering a Company’s True Value."
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