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

Roblox Corp RBLX stock plunged on Tuesday after Hindenburg Research issued a short report on the online game platform questioning its metrics such as user numbers.

The report alleged that Roblox inflated key user metrics, claiming daily active users (DAUs) and engagement hours are overstated by 25-42% and over 100%, respectively.

Benzinga has reached out to Roblox for comments.

Also Read: Roblox Targets 1B Users, Boosting Growth Through Apple, Alphabet, and Shopify Collaborations

Hindenburg’s report accuses Roblox of inflating DAU figures by equating DAUs with unique “people,” despite acknowledging in SEC filings that DAUs may include multiple accounts or bots.

Roblox also claimed it couldn’t identify duplicate accounts, though it tracked and consolidated them internally. Additionally, Roblox inflated engagement hours by including bots and inactive accounts (“zombies”), overstating user activity. The company reported key metrics to investors without independent third-party verification, leaving room for manipulation and misrepresentation.

Hindenburg’s report accused Roblox of prioritizing its growth metrics over child safety by cutting content moderation costs and allowing harmful content to increase on the platform.

Hindenburg claims the company’s push for higher user engagement led to lax safety measures, exposing children to inappropriate content, such as sexual exploitation, violence, and predatory behavior, all to boost user numbers and satisfy investors.

Hindenburg also highlighted insider stock sales and executive turnover as red flags. Since the company went public in 2021, Roblox insiders, including CEO David Baszucki, have sold $1.7 billion in shares. Meanwhile, three senior executives, including the CFO, have resigned within the last year, raising concerns about internal issues.

Since becoming a public company, Roblox has failed to turn profitable, with losses totaling $1.07 billion in the last twelve months (LTM).

Last week, The Bear Cave released a bearish report targeting Roblox for the fourth time since 2022. The report brought charges against Roblox, including the production of child pornography, child kidnapping, and physical abuse.

Roblox stock is up over 28% in the last 12 months. Investors can gain exposure to the stock through Vanguard Mid-Cap ETF VO and Vanguard Total Stock Market ETF VTI.

Price Action: RBLX stock is down 5.82% at $38.93 at the last check Tuesday.

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