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Roblox reverses course and aims to go public via a direct listing

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The video game platform Roblox was valued at $29.5bn after a capital raising and said it would go public through a direct listing, in a reversal of plans after several eagerly-received initial public offerings caused concerns about the share-pricing process.

The San Mateo-based company said on Wednesday that it would file a registration statement with the Securities and Exchange Commission for a direct listing on the stock market, a process that usually does not result in any new capital being raised. Roblox did not say how many shares would become available for immediate trading.

Its announcement marked a rare example of a company publicly switching from a traditional IPO to a direct listing, an alternative route to public markets that some backers argue is more efficient and results in a fairer price for a company’s shares.

Roblox had originally filed for an IPO that advisers expected to occur before the holiday season last year. But it later changed course after the tech groups Airbnb and DoorDash experienced large first-day trading “pops” in early December, delaying the listing to 2021.

“Based on everything we have learned to date, we feel there is an opportunity to improve our specific process for employees, shareholders and future investors both big and small,” David Baszucki, Roblox chief executive, wrote in a memo to staff in December.

Roblox would join a small but growing group of companies favouring a direct listing. The workplace collaboration company Asana and data analytics group Palantir both went public through the alternative process on the same day in September last year.

Separately, Roblox said investors led by Altimeter Capital and Dragoneer Investment Group had invested $520m that valued the company at $29.5bn, including the new capital.

That figure represented a more than seven-fold increase from the valuation investors assigned Roblox in February, underlining the rapid growth it has experienced during the coronavirus lockdowns.

Roblox earned almost $1.2bn in the first three quarters last year from selling its virtual currency to gamers, though it remained lossmaking.

Start-ups sometimes raise large rounds of financing before going through direct listings, in lieu of the proceeds they would normally receive from an IPO. Roblox said investors agreed to purchase shares at $45 a piece, a price that could help guide first-day trading in the company’s stock.

Goldman Sachs, Morgan Stanley and JPMorgan had served as lead underwriters on Roblox’s prospective IPO last year.



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Krispy Kreme: sugary valuation piles on the dollars

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Krispy Kreme declares in its listing prospectus that its purpose is to “touch and enhance lives” through doughnuts. Investors who consider swallowing this richly valued offering risk financial heartburn instead. For a fried dough merchant Krispy Kreme does not make a lot of dough.

The Charlotte-based company, which operates more than 1,700 shops in the US and overseas, is planning to sell almost 27m shares for $21 to $24 apiece. At the top end of the range, this values Krispy Kreme’s equity at almost $3.9bn. Throw in total debt of $1.2bn and the enterprise value is 35 times last year’s adjusted ebitda. 

This is a valuation as sickly sweet as a chocolate-iced custard filled doughnut. Inspire Brands paid 24 times for rival doughnut chain Dunkin’ Brands in October. Unlike lossmaking Krispy Kreme, Dunkin’ is consistently profitable.

Owner JAB Holding will try to drum up investor enthusiasm by fixing their gaze on Krispy Kreme’s sales growth. Revenue grew 17 per cent last year to top $1bn. But so did the tide of red ink. The company made a net loss of $64m in 2020, up from $37m in 2019 and $14m in 2018. Costs related to buying back franchises are partly to blame. But if Krispy Kreme has not been able to make a profit from selling sugary pastries in the past three years there is no reason to expect a sudden turnround.

It makes sense that JAB would want to cash in some of its stake now. The US initial public offering market is red-hot. Companies have already raised $70.6bn since the beginning of the year, a record start, according to Refinitiv. After taking Krispy Kreme private in 2016 for $1.35bn, JAB will continue to own almost 78 per cent of the company’s shares after the IPO. 

This is less tempting for investors. With salad chain Sweetgreen and coffee purveyor Dutch Bros also readying to go public, there are plenty of other opportunities to invest in America’s growing appetite.

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Nordgold pulls planned London listing

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Russian gold miner Nordgold has pulled its plan to list in London just two weeks after its announcement, citing volatility in the price of the precious metal.

Nordgold said on Tuesday it would “not be sensible to pursue an IPO at this particular juncture”, following a 6 per cent drop in the gold price since the company announced its intentions on June 3.

The miner, which is owned by the family of billionaire Alexei Mordashov, had planned to sell a 25 per cent stake to investors, including via a secondary listing in Moscow. The company held meetings with 220 investors, according to one person familiar with the deal.

Mordashov had targeted inclusion in the FTSE 100 index and his family were set to make about £1bn from the listing. There was a “strong appetite for gold stocks in the market, also gold stocks from Russia”, he told the Financial Times on announcing the London listing plans.

But the announcement last week by the Federal Reserve that it may raise interest rates in 2023 dented investor enthusiasm for gold, according to the company.

“Recent central bank comments indicating an acceleration in expected interest rate rises have created significant uncertainty and volatility in the resources sector, in particular impacting gold and gold equities,” Nikolai Zelenski, Nordgold chief executive, said in a statement.

Nordgold has nine mines — four in Russia, three in Burkina Faso and one each in Guinea and Kazakhstan. It produces more than 1m ounces of gold a year and reported earnings before interest, tax, depreciation and amortisation in excess of $1bn last year.

Nordgold was previously listed in London but left the exchange in 2017. “We delisted the company always with an intention to float it again under favourable conditions,” Mordashov said in an interview with the FT this month.

Nordgold had hoped to attract investors by paying higher dividends than its peers in North America. It is developing two new gold mines in the Far East of Russia, which will help it boost production by an expected 20 per cent over the next five years.

In contrast, production at the world’s largest gold miner, Newmont, is set to remain roughly flat until 2025.

Nordgold was only planning to sell existing shares and not raise any capital in the listing, which means it can wait for a better listing window, according to people familiar with the deal.

Many investors believe the Fed is in control of inflation and that they do not need gold as a hedge in their portfolio, according to people with knowledge of Nordgold’s listing plans.

Since the Fed’s comments, shares in gold miners as measured by the NYSE Arca Gold Bugs index have fallen 9 per cent.

Shares in Canadian gold miner Endeavour Mining have fallen 4 per cent since the company listed in London last week.



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Soho House owner files for New York flotation

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The owner of Soho House, the private members’ club, has filed for an initial public offering, as the company seeks to tap into investors’ growing interest in leisure stocks.

Membership Collective Group, which owns 28 Soho Houses worldwide among other properties and a retail brand, said on Monday that it plans to list its shares on the New York Stock Exchange under the ticker “MCG”.

The company said in a filing with the Securities and Exchange Commission that it intends to raise $100m, a figure that is often used as a place holder for calculating registration fees. It has yet to determine the number of shares it will offer or a price range for those shares.

A rebound in travel and dining demand heading into summer, bolstered by vaccinations against Covid-19, has stoked speculation that MCG will target a valuation greater than the $2bn marker set in a $100m funding round last year.

The hospitality group, backed by US billionaire Ron Burkle, said its membership numbers held steady through the pandemic. It retained 92 per cent of Soho House members in the 2020 financial year and received more than 30,000 applications for its membership brands, according to the S-1 filing.

Revenues in the first quarter of this year totalled $72m, down from $142m in the same period a year earlier. It also reported a net loss of $93m, compared with a $45m loss in 2020.



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