Roblox Corp. (RBLX) has fired back at a damning report by Hindenburg Research, an investment firm known for its activist short-selling campaigns. The report, released in September 2024, accuses Roblox of misleading investors by inflating key metrics like daily active users (DAUs) and engagement hours, as well as failing to adequately protect young users from sexual predators and inappropriate content.
In a strongly worded statement, Roblox vehemently denied these accusations, calling the financial claims “misleading” and refuting allegations of inadequate child safety measures. The company defended its methodology for calculating DAUs, arguing that it accurately reflects platform engagement by counting each user only once per day, even if they log in multiple times across different accounts. Roblox also refuted Hindenburg’s claims that the company inflates engagement hours by including bot accounts.
Hindenburg’s report paints a stark picture of Roblox’s operational transparency, alleging that the company inflates its daily active user count by as much as 42%. The report claims that Roblox includes multiple accounts per user, ranging from alternate accounts to bot-driven profiles, leading to a misleading representation of actual user engagement.
Perhaps the most troubling part of the Hindenburg report concerns child safety. Hindenburg accuses Roblox of being a “pedophile hellscape” where predators easily exploit the platform’s young user base. The firm claims that Roblox lacks adequate upfront screening to prevent sexual predators from joining the platform and that inappropriate content, including violent and sexually explicit games, remains easily accessible to children.
Roblox countered these accusations by highlighting its commitment to user safety. The company emphasizes that it takes any content or behavior that violates its standards extremely seriously and boasts a robust set of proactive and preventative safety measures designed to catch and prevent harmful activity on the platform.
Hindenburg also accused Roblox insiders of cashing out $1.7 billion in stock since the company’s 2021 public offering, including $150 million worth of stock sold over the past 12 months, with CEO David Baszucki reportedly selling $115 million of that total. While Roblox didn’t directly address the insider sales in its response, it 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 October 31, 2024, will likely be a key moment for the company to further defend its financial position and address growing concerns about user safety. The accusations raised by Hindenburg have cast a shadow over Roblox’s future, and how the company responds to these accusations will likely determine its trajectory in the coming months and years.
