In this episode of Industry Focus: Tech, Dylan Lewis and Motley Fool contributor Brian Feroldi take a deep dive into Roblox, an immersive gaming metaverse highly popular with kids aged 13 and younger. Special guest, and certified real child, Lindsey Feroldi joins the show to share her firsthand opinion on the Roblox platform, and Dylan and Brian break down the business to lay out the investing case for the business. Stay tuned to the end to learn why Brian thinks the Roblox IPO is a "day one buy," when it finally comes to market. 

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This video was recorded on December 11, 2020.

Dylan Lewis: It's Friday, Dec. 11, and we're talking about Roblox. I'm your host Dylan Lewis, and I'm joined by Fool.com's certified conviction czar of competitive cash compounding capital companies, Brian Feroldi. Brian, how's it going?

Brian Feroldi: Excellent. And that title is brought to you by Cornelius Capital on Twitter, @10xMOIC; that account slacked me that title. I played around with some of the words, but hey, I liked it.

Lewis: You know, it stands to reason that eight Cs comes from Cornelius Capital. [laughs] I think I got that count right, eight. Love that, love the recurring bit. And of course, if people want to suggest tongue-twisters to try to get me as we open the show, @brianferoldi on Twitter, right?

Feroldi: Yeah. Their success rate must be better than mine, because my success rate is zero. [laughs]

Lewis: But it's fun to crowdsource it. Someone's going to get me one day with an "X," you know, and I'll trip up and wind up pronouncing it like a "Z" or an "X" when it should be the other one. That's going to be my downfall, I think. I am going to get cocky and then some silent letters are just going to be my undoing, Brian. [laughs]

Feroldi: And we will all celebrate when that happens.

Lewis: Today, though, we are going to be celebrating a soon-to-be public company, Brian, and this is Roblox.

Feroldi: This is a company that my kids have been playing with their product for maybe a year, slightly longer than that, but this is a company that is in my house. All three of my kids play this game. My middle daughter, in particular, is quite fond of this, so when I told her that we were talking about Roblox, she became very excited. And I actually asked for her opinion on Roblox prior to this, and she was kind enough to record a little audio message for the podcast listeners.

Hi, what's your name?

Lindsey Feroldi: My name is Lindsey Feroldi.

Feroldi: Lindsey Feroldi. And what is your favorite game, Lindsey Feroldi?

Lindsey Feroldi: Roblox.

Lewis: Roblox. Why do you like playing Roblox?

Lindsey Feroldi: Because it has over 600 games I can play, and I can play the games with my friends.

Feroldi: How can a game have over 600 games to play?

Lindsey Feroldi: Well, they are minigames. So, you click on them and press the "play" button.

Feroldi: So, you log in to Roblox, and there's all these games to choose from and you pick on whatever one you want to play and then you're playing like a minigame?

Lindsey Feroldi: Yes. You can play it with your friends any time.

Feroldi: And how, when you log in, you can tell that your friends are playing too?

Lindsey Feroldi: Yes, because if you scroll through, like, there's a name list. You can scroll through it, and if you find the person's name you're friends with and there's two people's faces on top, then that's who it is.

Feroldi: OK. So, you can log in to Roblox, there's a whole bunch of games, you can see that your friends are playing, and then you can choose from these 600 games you're playing?

Lindsey Feroldi: Yeah, but most of them by the games you can play, like the top row is continue playing the games you play. And you can also go to search, to search up any other games your friends are playing that you might want to play, or you can just click on their icon and then press join.

Feroldi: And with all those games to choose from, are there, like, more games that show up every day or every time you log in?

Lindsey Feroldi: Well, no. But, yeah, for the bottom most of my friends play different games all the time, so.

Feroldi: And how do you know which one of those 600 games is fun?

Lindsey Feroldi: Well, you go search up names you might like, like, some of my favorites are, like, simulators or, like, Adopt and Raise is, like, No. 1; Pet Simulator is No. 2. And I also like the Tycoon ones.

Feroldi: OK. Now, did you have to pay money to download Roblox?

Lindsey Feroldi: No.

Feroldi: No?

Lindsey Feroldi: No.

Feroldi: So, how does Roblox make money?

Lindsey Feroldi: By people buying Robux. It sounds like a weird name, and it is. And it's just people buying things to make the game funner or better, so you can get, like, I don't know, more things. So, you can, like, buy coins to make your thing better, you can buy things, like, say, in one of the obbys, also known as parkour obbys, and you can just click on the rainbow carpet, and somebody who'd buy it would click on it, wait for it to finish purchasing, and then they would instantly get that thing, and they could equip it and go past levels and levels and levels so many times.

Feroldi: So, it's kind of like you can go on there, you can use real money to buy Robux, and then you can spend the Robux in the game to buy, like, clothing, accessories, and make your avatar better?

Lindsey Feroldi: Yeah.

Feroldi: OK. And is that something that you want your mom and dad to do for you?

Lindsey Feroldi: Yeah.

Feroldi: [laughs] OK. Anything else that we need to know about Roblox? Is it your favorite game?

Lindsey Feroldi: Yes.

Feroldi: Will it be your favorite game for a long time?

Lindsey Feroldi: Yes.

Feroldi: Do you want to be a shareholder?

Lindsey Feroldi: Yes.

Feroldi: OK. I guess we'll have to make you a shareholder someday.

Lindsey Feroldi: [laughs] Yay!

Feroldi: [laughs] Thank you. What's your name again?

Lindsey Feroldi: Lindsey Feroldi.

Feroldi: Okay. Thank you, Lindsey.

This is a fantastic company to introduce kids to investing, because the odds are extraordinarily good, if they play video games and they're under age 13, not only are they probably on Roblox, the chances are pretty good they're pretty passionate about Roblox. So, this is a great company to introduce investing to your children.

Lewis: Yeah, I think if you're not familiar with this business, is it safe to say that kids of your daughter's age look at this basically the way they do YouTube, where it's just like, it is what they want, it is the thing that they're attached to, and like, you got to rip it out of their hands?

Feroldi: Yes, in a very real way it is. For those that don't know, my daughter described what Roblox is for everybody on the podcast in a kid way of doing so. But essentially, it's almost like a metaverse. You log in to it, your friends log in to it, you can interact with your friends, you can play games with your friends. And there are hundreds of games to choose from. I think on her homepage, she has, like, 600 games that she chooses from. You can see which games your friends are playing; you could pop in; you can interact with them. So, it's almost like a universe that you enter when you join Roblox.

Lewis: What I think is really interesting about this business, Brian, there's this chart that's out there, and you'll see that in investing circles, you'll see it in business circles. And it's what people think success looks like, and it's an up into the right line, right, and it's nice and straight, there are no hiccups along the way. And the reality, you know, the Exhibit B in this is, what success actually looks like, and it's a scatterplot with the line going up, down, sideways, backing over itself, reversing, going up, and it makes its way up into the right eventually. This company traces its roots back three decades, more than three decades. And I think it just goes to show how long this idea has been in development in some form.

Feroldi: Yeah, the two co-founders of Roblox got together to make their first company in 1989. The co-founders are David Baszucki and Erik Cassel. And in 1989 they programmed a 2D simulated physics lab that they called Interactive Physics. And it was used by students to simulate car crashes, to simulate the destructive destruction of buildings in a computer-generated environment. It was a very popular program, and it's very impressive that they were able to do that in 1989. That kind of laid the groundwork for these two to work together and develop a love of creating games and simulations that are aimed at educating kids.

So, in 2004 they founded Roblox, and they meant this to be a multiplayer game that was, again, specifically aimed at educating and entertaining children. Today, their numbers are absolutely huge and they have grown tremendously, especially in the last year. They currently count over 31 million daily active users; that number was up 81% over the prior year. And it's also a platform that game developers can come to to create games on their own. And they have attracted 7 million game developers. So, to your point, it's been a rocky road to get here, but the numbers that they're putting out are impressive.

Lewis: Yeah, and this is definitely one of those classic benefits from COVID, benefits from stay-at-home-type businesses. They are a digital delivery business; they lean heavily on the cloud; they are mobile oriented; the upfront purchase cost is almost nonexistent. You know, it's very easy for people to just hop in and give it a shot. And so, this kind of has the hallmarks of a company that is going to see its growth rate accelerate dramatically in 2020.

Feroldi: Yeah. And if you've never experienced Roblox before, the best way that I can describe it is it's kind of like Ready Player One, if you've seen that movie or read that fantastic book series. So, Roblox is kind of like the oasis in that sense. You log in to it and you're presented in this interactive metaverse of a world where you can, again, interact with friends; you can use real money to buy Robux, which is the currency inside this world that you can use to upskill your avatar and buy digital clothing and accessories, which sounds crazy, but man, oh, man, is that something that kids want to do. So, that is the model here.

Lewis: Yeah. And then importantly, once you're in that universe and you have your avatar, you have a whole host of games that you can play. And it's this community development model, which is really interesting, where there isn't really, like, you have to kind of separate yourself from the standard gaming model where it's like EA Sports releasing Madden, and look at it much more as if like friends were coming together and creating games. And really what the whole point, I think, of Roblox is, is to foster an environment that allows for people that are creative to make fun experiences for other people. I think that's kind of the nut of this business.

Feroldi: A huge component of the attraction of Roblox is the diversity of games, the ability to create in a 3D world and the social aspects of it. My kids all are friends with their real-world friends, and they can talk with them, chat with them, play games with them in this simulation. And the business model is very similar to the ridiculously successful game Fortnite, where it's free to play, it's free to join, but if you want to make your character look cooler, that's when you have to pony up some cash. It sounds crazy, but wow, is that a successful business model.

Lewis: [laughs] There are real-life parallels there, Brian. You know, if you want to look good, sometimes you got to pay for some clothes, you know. You got to get a good haircut every now and then. [laughs]

Feroldi: My kids don't want Air Jordans, but they do want digital clothing, Dylan. [laughs]

Lewis: [laughs] It's a funny idea. But you know, I remember being a kid and being right there. You know, it's just it's what you get into. And I think that this is fun and, importantly, I think, because it's so kid-oriented, a very safe space as well. And there's a lot of time and effort and resources dedicated to making that happen, which I think, you know, you have a better seat on this, because you're a parent, Brian, but I have to imagine when you're thinking about kids' entertainment, that is first and foremost with what your kids are doing online.

Feroldi: That is definitely a way that this company really tries to separate itself out. Again, their kind of core market is kids aged 13 and under, and they call out right in the S-1 that they devote a lot of resources to making their environment safe. It's easy to report activity on the platform that you don't like, whether that's language, whether that's graphics. And they have a whole full-time staff that does nothing but make sure that Roblox is a safe environment. And they actually call out that the average incident rate is reported and dealt with in a matter of 10 minutes. So, you're never going to be perfect with that kind of thing, but as a parent, that's got to make you feel good.

Lewis: Yeah. And just to kind of help folks who are not familiar understand some of the layers to this business. We talked about the 3D digital universe. They have the application that people are actually encountering that universe with, and that's where most of the users are going to be coming into the mix, but then they also have the studio side which is really what allows creatives to develop and offer out these experiences to others. And then the infrastructure side of their business as well, which is cloud-focused.

So, there are a couple different layers to this company, and you know, you're only, as a user who is consuming games, going to be interacting with a very small portion of it.

Feroldi: Yes. And that is a part of the motivation for the designers, the game designers that come to the game. The users of the games pay real money to turn real dollars into this digital currency called Robux, and there is an incentive for the Roblox game developers to create products and immersive environments that convince the users to spend their Robux. And then there's a revenue share between Roblox and the developers of these Robux, which can then be converted back into real money.

So, one reason why they've developed, they have attracted 7 million game developers is because the platform itself is huge and it gives them a way to monetize their game development skills.

Lewis: Yeah. And this is classic network effects at play, right? And you mentioned before, the social element of it for users, you know, your daughter is on and her friends are on, and they can play together in the virtual world, but then the users attract the developers and vice versa. You have a very robust and vibrant developer environment that is going to attract users, because there's going to be interesting games. You have a huge user base, that's going to attract talented developers. They feed each other.

Feroldi: And again, at this point, these numbers are so huge. And I think that their kind of hyper-focus on 13 and younger has allowed them to grow this market, kind of corner a part of this market to themselves, and like you said, attract so many users. So, at this point of the game, this company definitely has some scale advantages going for it.

Lewis: Huge. And you put some numbers to it before, but it's worth re-emphasizing, 36.2 [million] daily active users, up just under a 100% year over year. That's a staggering number, bound to benefit. But I think the key is the millions of developers that they have -- 7 million developers. It speaks to the strength of the platform. I don't think that number is going to be going down anytime soon. And it just highlights what they're able to offer and the diversity in their programming.

Feroldi: I don't think it will either, but to your point from before, this is a company that has definitely benefited immensely from COVID and stay-at-home. I mean, all video game makers have been reporting kind of nutty numbers in 2020. The fact that they're choosing to IPO now, they might see that the next couple of years, they might have a harder time growing, given the explosive growth that they experienced in 2020. But I agree, I think that these numbers are going to continue to climb given the popularity of this platform.

Lewis: Yeah, we might see some growth pulled forward a little bit, huh, Brian? But I think this is probably bringing us to where this business would have been a couple of years from now. They need to live up to that valuation; we have to adjust some of our growth expectations accordingly. But you know, looking at the financials, the core business metrics look good. This is obviously a growth-mode business and it has the financials of a growth-mode business. But there's a lot of potential here, particularly as it continues to scale.

Feroldi: Yeah. And there's something unique about video game companies, especially one with a business model that this company has, where there are some kind of differentiated numbers that you have to get used to to looking at. So, a key number here is what's called net bookings. And that's basically how much money, real money, was converted into Robux during the year? And that number for the first nine months of 2020 was $1.24 billion. Now, just because that money is on Roblox platform Roblox can't officially book it as revenue until it's actually spent. So, in this case, their revenue number is actually a bit of a lagging indicator.

So, their revenue over the first nine months of the year was only about half of that, $589 million. Because of that, their bottom-line is really kind of crazy to look at. So, their net loss, on a GAAP basis for the first nine months of the year, was $206 million. However, in that same time period they generated almost $300 million in free cash flow. So, it's a little bit wonky to think about. I had a conversation with Aaron Bush, our resident videogame expert prior to this. I said, Aaron, what do you think about this? And he basically gives a lot more credit to net bookings and free cash flow than he does to revenue and net income, which is more of a lagging indicator.

Lewis: Yeah. Actually, Brian, I think you could just rewind to our most recent episode on C3.ai and take what we talked about there with that RPO [remaining performance obligation] number and basically look at it exactly the same way for this business with bookings and revenue recognition. You know, it is money that you know is going to be coming in at some point, but you haven't necessarily rendered the services in order to earn that money. Once you do, you can recognize it as revenue, but until you do, it's this big number that indicates more money is coming.

Feroldi: Yeah. So, when this company reports earnings, pay attention to bookings, pay attention to free cash flow, don't just look at the headline GAAP numbers of revenue and net income and draw conclusions.

Lewis: Yeah. And we of course, because this is a quasi-social gaming business, we have some per user numbers as well from this company.

Feroldi: Yeah, it's a fun one. Average bookings per daily active user, or ABPDAU ...

Lewis: ... ABPDAU. [laughs]

Feroldi: Is that what it is? ABPDAU, yeah ...

Lewis: ... that's what I am making up, Brian. I don't know if that's true. [laughs]

Feroldi: [laughs] ABPDAU. So, this is, again, average bookings per daily active user. This number has been trending up over time. In the most recent quarter, the third quarter of 2020, this number was just shy of $13. Over the same period of prior year, it was just about $9. So, the key point there is not only are the number of users growing, but the spending and revenue per user is also growing.

Lewis: Yeah. And as you're looking at this number over time, I imagine that there's going to be a little bit of seasonality to it. So, it's probably something that you're going to want to look at on a year-over-year basis. Guessing here that Q3 and Q4 is going to be stronger for this number than Q1 and Q2.

Feroldi: That's probably a pretty fair guess. And you know, 2020's numbers are going to throw off a whole bunch of metrics. So, it's going to be interesting to see what they report in 2021. But yes, video games, in general, do the best in the fourth quarter.

Lewis: So, we talked about the network effect a little bit before. There are some very interesting elements that this business has that kind of insulate it from competition and give it what feels like a relatively strong moat, Brian.

Feroldi: I think the community aspect of this platform is probably its biggest competitive advantage. Again, like any social product, my kids want to be on Roblox because their friends are on Roblox. They know if they sign in, there's going to be someone online that they can play with, that they can explore with, that they can communicate with. At this point, Roblox has so many users that it's become an insulating factor for them. So, the social aspects of this game are huge; that's the network effects we talked about. The same goes for the developers.

But again, from a parenting perspective, I feel good knowing that my kids are playing [laughs] Roblox, because so much emphasis on the platform is put into user safety. So, I think those two things will combine to keep this company protected from the competition.

Lewis: Yeah. I think the way that they've set up their developers also is a strength for them. And really, kind of, it seems to me at least, you know as an outsider reading through their S-1, that they are focused on creating a thriving community, creating structures that allow developers to make money and not make games overly onerous when it comes to payments. And they have a 70/30 split, I think, with their developers, which is pretty standard when you're in the app store world. So, I think that they are kind of empowering developers to be able to make money, but it isn't necessarily the mandate of the system. And that allows for a lot of creative control, and I like that they're able to kind of share the pie.

Feroldi: That's what they do. So, I think that this company is insulated from the competition and can remain so for a couple of years, and that's going to be important, because this company has some big plans over the next couple of years.

Lewis: Yeah, I mean, I think what's kind of interesting in hearing how they focus on 13 and under is, you know, it's great. They clearly have lightning in a bottle with that market. There's potential outside of the market for people that are currently older than 13, but also there's potential for them in creating experiences for people that are currently 11 that will at some point be 15 or 16, you know, so there are kind of a couple different ways that this market gets bigger for them.

Feroldi: That's one of the things that they want to do. They want to go upstream and keep users on the platform as they continue to age, whether or not they would do that successfully is another question, but they do note that their fastest-growing user segments are older generations than their core market. So, it does appear that they're making some progress there.

The other big opportunity for this company, beyond just getting more revenue per user by introducing new products and new services, they also have some big plans in international markets. Currently, the majority of their revenue is generated in United States and Europe, but they recently, in 2019, signed a partnership with Tencent, which is the biggest video game maker on Earth and based out of China, they set up a joint venture to bring Roblox to the Chinese market, which is an absolutely massive market. And Tencent has deep relationships in that market. So, that could be a major growth driver for this company over the next couple of years.

Lewis: Yeah. And I think also, like, there's another tailwind here, Brian, in the way that gaming is happening now and where they are positioned in this market. I was watching some of the things that were, just talking about the company, it was some of their company videos and some interviews with their CEOs and stuff, and one of the things that they emphasize over and over again is that they aren't really adding a lot of bloat to gaming. And in fact, their model really removes a lot of the bloat that's in the video game industry. You know, some of that's marketing, some of that is the timelines that go into things and the deadlines that approach as you're doing massive releases like FIFA would or like a Madden would for Electronic Arts. So, I think their model helps remove some of those things because they have their own immediate distribution for everything that they're doing.

But they're also harnessing mobile in a way that is really interesting to me. And they have I believe over half of their revenue came from App Store, so iOS, and Google Play for the first nine months of 2020. More than 68% of their engagement hours were users who signed up on mobile. I think they're taking advantage of the fact that it is easier and easier to get nontraditional gamers to start gaming. And you know, everyone has a video game console in their pocket right now. I think this is a business that benefits from mobile gaming in a really profound way if they do things right.

Feroldi: For sure. And they're also, I think, really well-positioned to make the jump to augmented and virtual reality down the road. I mean, just the basic nature of the games themselves are so immersive. You can play these games on Facebook's Oculus devices, for example. So, I'm a big believer that 10 years from now augmented reality and virtual reality are going to be [laughs] far more pervasive than they are today, Roblox is playing right into that trend.

Lewis: For the folks listening along, it's like, all right, you guys have talked about the business, you've talked about the numbers, let's talk management. Fear not, that's what's coming right now. We couldn't be doing an S-1 show with Brian Feroldi without talking about management and culture a little bit. Brian, you did your homework on Glassdoor. What did you see?

Feroldi: Yep. So, the co-founder, David Baszucki, he is still in charge, he is still the CEO, as you mentioned before. The other co-founder, Erik Cassel died, unfortunately, in 2013 after a battle with cancer.

Baszucki, we don't know exactly what the share class ownership is going to be until after the IPO happens, however, as we've seen numerous times with founder-run companies, he does have a strong control over the future of this business. He himself is the sole owner of Class B stock, which has supervoting rights. So, he is going to have his hand on this company for a long, long time.

Investors should feel pretty darn good about that, because as part of our due diligence done, we always check Glassdoor.com. Wow, do employees like working at this company.

Lewis: Yeah, I mean, 97% approve of David Baszucki and 87% will recommend to a friend. Those are strong numbers. And I think this is a business where it's worth watching some of the videos that they put out. If you're seriously interested in investing in them, what you'll see very quickly is there is a creative vibe to this business. They really like to empower employees, because so much of what they do as a company is empowering developers. And so, I really feel that when I'm watching and listening to management.

Feroldi: This is a company that seems to have all of its stakeholders in mind. Employees clearly like it; gamers clearly like it; developers clearly like it. Investors have done very well so far, if you could get your hands in this company in the private market. I mean, just in February, this company raised capital at a $4 billion valuation. It seems like they're going to be coming public at an $8 billion valuation. My guess is, this company is going to pop like crazy on the first day, we will have to see. But when it comes to management, I really like what I see here.

Lewis: Yeah. You know who might not like what they see, Brian, the competition. And I think [laughs] that that's probably one of the risks for Roblox is this is a crowded space, and you know, there are a lot of players here. We've talked plenty on this show and in various Motley Fool formats about companies like Electronic Arts, like Take-Two Interactive, like Activision Blizzard. Those are just a couple of the big names in the videogame industry. There's a big pie here. There are a lot of players. And on a relative basis, like, Roblox isn't that big.

Feroldi: Yes. It's one of the smaller players when compared to the industry giants that it's going up against, but it has definitely carved out a niche for itself. And the great thing about the video game market, in general, just because one company is winning, doesn't mean the other ones are hurting. In fact, you could argue that the better one company does, the more likelihood there are to grow the entire gaming population and the better it is for everybody. So, competition is definitely something to watch here, but Roblox has been growing just fine over the last 15 years, even though it has plenty of competition.

The bigger question that I have about this company is the users themselves. Yes, they do a great job of having a stranglehold on that 13 and under generation, but what happens when they start to age out? This is definitely a game [laughs] that I could see becoming uncool to play with once you hit a certain age group and then you upgrade to, kind of, more mature games. So, a big part of this company's growth strategy is hanging on to its gamers for longer and longer. That might be tough for them to do.

Lewis: You will have a front row seat to whether or not that happens, Brian. [laughs]

Feroldi: [laughs] Yes, I will. I guarantee you, every couple of months I'll be asking my daughter, are you still interested in Roblox? Are you still interested in Roblox? So far, I've gotten nothing but yeses.

Lewis: [laughs] It's going to be a lot of "yes, Dad." There are a couple of other just kinds of general business risks that I think are worth noting. I mentioned that there is a large chunk of money coming from those mobile app stores. And you know, we mentioned that 70/30 cut that Roblox takes; those app stores also take their cut. And so, unfortunately, they are taking a haircut on anything that comes in through those sources. And it's just kind of the nature of doing business there. They also have some reliance on AWS with their tech infrastructure.

Feroldi: Yeah, that is something for investors to just be aware of and watch. If the CEO here ever pulls an Epic Games and just [laughs] thumbs down to Apple and says, hey, we're pulling ourselves off of the App Store because we don't like your revenue share, that would really hurt the investment case. I don't think that's going to happen, especially once this company becomes public. Epic Games could kind of do that because they are still private and still co-controlled, but hey, it is a risk to be in mind.

The bigger risk to me that I see is reputational damage. If somehow hackers got in here and, like, spammed, made the environment unsafe for kids, and if the reputation got out that Roblox is a game that you shouldn't be letting your kids play, that I could see limiting this company's growth more than anything.

Lewis: Yeah, I think that's right. And it's the thing that they enjoy so much strength from, but it also is kind of the Achilles' heel for them, where if anything goes wrong, it is going to massively disrupt the thesis, because no parent is going to want their kid playing something on a platform that they don't think is safe.

Feroldi: So far, so good on that front. And again, this company seems deadly serious about defending its reputation and making its platform safe. So, as long as they continue to do that, I think that they'll maybe be able to manage that risk without any problem, but that's definitely something for investors to know.

Lewis: So, Brian, all told, we have a digital delivery business that has created its own ecosystem, enjoys strong network effects, I believe 75% gross margins by my count, depending on whether you want to include infrastructure costs in there. I think that that's a relatively strong investing case.

Feroldi: You missed out founder-led, great corporate culture, and long-term growth trajectory, so, yeah, if you add those in, I would say it gets even stronger, Dylan.

Lewis: Well, you know, Brian, I just want to leave something for you to say. [laughs]

We don't know the firm details on when this company will begin trading. I'm assuming it's going to happen sometime in December or before the end of the year at least. Is this a watchlist stock for you?

Feroldi: No, this is a buy-day-one stock for me. This is a gift that my kids will be getting. [laughs] How much of my personal portfolio goes into it, that I don't know, but I will be buying shares of this for all of my children.

Lewis: So, to unpack that for our listeners [laughs] and our members listening, there's kind of two motivations I hear there, Brian. There's the, this is a layup for getting my kids interested in investing, and I want to take advantage of it. But purely business, not thinking at all about the very nice and heartwarming element of you and your family investing together and putting on more of a cynical analyst's hat, where would this rank, kids aside, not really focusing too much on getting them investing?

Feroldi: Very highly. I mean, just purely on the, I like this business, it ranks very highly. The biggest questions that I have are going to be how fast can this company grow and what is the realistic valuation that I, as a non-IPO buyer, will be able to pay for this thing? That I don't know. I could very much see this company popping 100% on Day One, just like we saw Airbnb do earlier this week and the valuation being completely crazy. So, how it trades and what kind of valuation I'll be able to pay will determine how much I personally buy, but I'm buying some shares for my kids on day one, no matter what. [laughs]

Lewis: That's awesome. And that'll be a fun story to tell them in the years that follow, Brian, I'm sure. Yeah. And we'll just have to see. I mean, C3.ai also more than doubled on its first day. And I think, to date, there have been almost 20 companies that have [laughs] more than doubled from issuance price. So, it's been a little bit of a crazy year for people that are buying things early on IPOs.

Feroldi: But C3.ai had that fantastic ticker. So that's at least for a 75% jump, right?

Lewis: [laughs] However you need to justify it to yourself. Brian, thank you so much for hopping on today's show. And importantly, thank you for tapping your junior analyst to join us as well. It's always great to get perspectives outside of our own.

Feroldi: She was thrilled that I wanted to know her opinion on Roblox, Dylan, believe me.

Lewis: [laughs] Yeah, I'm guessing that wasn't a hard ask.

Feroldi: [laughs] Not at all.

Lewis: Listeners, that's going to do it for this episode of Industry Focus. If you have any questions or you want to reach out and say, "Hey!" shoot us an email at IndustryFocus@Fool.com, or you can tweet us @MFIndustryFocus. If you're looking for more of our stuff, subscribe on iTunes or wherever you get your podcasts.

As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against stocks mentioned, so don't buy or sell anything based solely on what you hear.

Thanks to Tim Sparks for all his work behind the glass today, and thank you for listening. Until next time, Fool on!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.