Roblox Corp. RBLX formally rejected the accusations levied in a recent report by Hindenburg Research, an investment firm known for activist short-selling.

The report accuses the gaming platform of inflating key metrics like daily active users (DAUs) and engagement hours to mislead investors, as well as failing to protect young users from sexual predators and inappropriate content.

See Also: Hindenburg Hits Roblox With Short Report, Accuses Gaming Platform of Misleading Investors By Inflating Metrics

In response, Roblox issued a statement calling the financial claims “misleading,” while refuting allegations that it underreports issues related to child safety on the platform.

Inflated Metrics: The Core Of Hindenburg's Accusations

Hindenburg's report paints a damning picture of Roblox’s operational transparency, accusing the company of inflating its daily active users by as much as 42%.

The report claims Roblox includes multiple accounts per individual user — ranging from alternate accounts to bot-driven profiles — leading to a misleading picture of actual user engagement.

Roblox fired back, asserting that its methodology for calculating DAUs is designed to present an accurate reflection of platform engagement.

"We define a DAU as a user who has logged in and visited Roblox through our website or application on a unique registered account on a given calendar day," the company stated. It also clarified that users who log in multiple times across different accounts in a single day are only counted once, arguing this system reflects global engagement trends more accurately than alternatives based on strict calendar-day cutoffs.

Hindenburg also called into question Roblox's reported engagement hours, alleging the company inflates these figures by counting bot accounts that remain logged in for extended periods.

According to Hindenburg, a technical review of 297.7 million rows of data showed that real users average only 22 minutes per day on the platform, significantly lower than Roblox's reported 2.4 hours per day.

Roblox Responds To Safety Concerns

Perhaps the most troubling part of the Hindenburg report revolves around child safety. The research firm accuses Roblox of being a "pedophile hellscape" where predators easily exploit the platform's young user base.

Hindenburg claims there is little upfront screening to prevent sexual predators from joining Roblox, and that inappropriate content — including violent and sexually explicit games — remains accessible to children.

“Roblox takes any content or behavior on the platform that doesn't abide by its standards extremely seriously, and Roblox has a robust set of proactive and preventative safety measures designed to catch and prevent malicious or harmful activity on the platform,” the company said in response.

Insider Stock Sales?

Hindenburg accused Roblox insiders of cashing out $1.7 billion in stock since the company’s 2021 public offering. Over the past 12 months, insiders allegedly sold $150 million worth of stock, with CEO David Baszucki reportedly selling $115 million of that total.

While Roblox did not directly address the insider sales in its response, the company reaffirmed its financial health, pointing to 22% growth in bookings, which reached $955.2 million in the second quarter of 2024.

Roblox's upcoming third-quarter earnings call on Oct. 31, 2024, will likely be a key moment for the company to further defend its financial position and address growing concerns about user safety.

Read Next:

• Roblox Reports 13,000 Child Exploitation Cases In 2023, Details Safety Measures

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