Roblox stock drops after pulling down China app for retooling

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Roblox Corp. Shares of the company fell on Friday following a report that the social-gaming company’s app in China would be unavailable for an undetermined period after it was shut down in December.

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roblox rblx,
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Shares fell as much as 7% in Friday’s trading and were last 5% lower at $84.59. Shares are up more than 80% compared to the $45 reference price established when the company went public in March, but are down about 40% from their peak of $134.72 in mid-November.

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Back in December, Roblox acquired Tencent Holdings Inc. Pulled its app to a service separate from Roblox for the Chinese market called “LuoBuLesi” in partnership with 700,
+1.37%,
And the July release of the app was called a . portrayed as testing, In a statement to Reuters, Roblox revealed that it has taken the app down completely to create “the next version of Luobulacy”, but did not indicate when that version would return.

“It is important that we now make the necessary investments, including investments in our data architecture, to realize our long-term vision,” Roblox told Reuters.

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In Roblox’s S-1 filing last year, the company said it controlled 51% of its joint venture with Tencent, which will operate and publish LuoBuLesi in China. Roblox said that LuoBuLeSi will “create a special foundation to increase our penetration of the China market.”

Roblox shares fell in the double digits after the release of lower-than-expected user numbers since November last month, and have yet to recover. The news that Chinese users have been unable to access their version of the game since early last month could be a warning for future usage numbers.

“It is not clear whether this is related to the regulatory gaming environment in China, but we see this as an unlikely unexpected headwind to user metrics in the near-term,” analysts at KeBank Capital Markets wrote in a note Friday morning. ” “China’s long-term potential remains huge, but this would suggest a slow, iterative process that investors should expect.”

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