Hindenburg vs Roblox: Short Seller Alleges 42% Metric Inflation, Roblox Shares Tumble 4%

Hindenburg Research, a well-known short seller, released a report accusing Roblox Corporation of inflating its key business metrics. The report, titled “Roblox: Inflated Key Metrics For Wall Street And A Pedophile Hellscape For Kids,” was published on Tuesday, October 8. Following this, Roblox’s shares dropped by 4%.

What Did Hindenburg Claim?

Roblox, a gaming company valued at $27 billion, has reported losses every quarter since going public. According to Hindenburg, these losses total $1.07 billion. The short seller claimed that Roblox is misleading investors, regulators, and advertisers by inflating its user numbers by 25-42%. Additionally, they alleged that the company’s reported “engagement hours” are exaggerated by over 100%.

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Hindenburg pointed out that Roblox reported an average of 2.4 hours of engagement per day for each user in 2023. This figure is significantly higher than the average time spent by U.S. kids aged 8-12 playing mobile games, and it exceeds engagement on social media platforms like YouTube, TikTok, and Instagram by 26-166%.

Insider Stock Sales

Hindenburg also noted that Roblox insiders have sold $1.7 billion in stock since the company’s IPO in 2021. Over the past year, insiders sold $150 million worth of shares, including $115 million sold by Roblox CEO David Baszucki.

Concerns Over Inappropriate Content

The report raised serious concerns about inappropriate content on Roblox, including the presence of adult material and users soliciting sexual acts from minors. Hindenburg said that there are thousands of explicit Roblox-related videos on adult websites, which invite users to create inappropriate content.

Impact on Roblox’s Stock

Following the release of Hindenburg’s report, Roblox’s stock fell 4% to $39.75 in early trading on Tuesday. Hindenburg confirmed they had taken a short position on the stock. Before the market opened, the stock had already dropped 13%, and Roblox’s shares have lost 9.5% of their value this year so far.