Hindenburg Research Discloses Short Position On Roblox: Retail Trashes The Stock

Shares of video-game developer Roblox Corp (RBLX) slid on Tuesday after short-seller Hindenburg Research disclosed a short position on the stock.

Hindenburg alleged that Roblox is lying to investors, regulators, and advertisers about the number of people on its platform, having inflated the metric by over 25-42%. The company has also inflated engagement hours by an estimated 100%+, it claimed.

“Interviews reveal Roblox effectively has two sets of books for counting users: one for internal business decisions, in which multiple accounts are ‘de-alted’, and one used by the finance team that reports higher metrics to investors,” it said.

Hindenburg also claimed that its in-game research revealed an “X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech.”

“Roblox is compromising child safety in order to report growth to investors, per our interview with a former senior product designer,” it said.

Following the release of the report, Roblox shares witnessed a knee-jerk reaction but pared a significant part of the losses by mid-morning. At the time of writing, the stock was down over 3%.

However, retail sentiment on Stocktwits crashed into ‘extremely bearish’ territory (3/100) from ‘neutral’ a day ago, hitting one-year lows. The move was accompanied by ‘extremely high’ message volume.

Hindenburg cited a former employee to claim that Roblox faces saturation in its top markets like the U.S. and Europe and is now attempting to keep the appearance of growth alive by adding loss-generating users in markets like Asia.

“Overall, we think Roblox has adopted the Silicon Valley approach of ‘growth at all costs’, whether by misleading or outright lying to investors about its key metrics or by opening its platform to dangerous predators and illicit content unsuitable for children,” it said.

Stocktwits users with a ‘bearish’ outlook have expressed skepticism on the stock.

One user believes the stock was overvalued and was due for a correction regardless of the Hindenburg report.

Another user expressed trust in Hindenburg’s research.

Also See: Walmart Expands Pet Care Offerings: Retail’s On The Fence

For updates and corrections email newsroom@stocktwits.com

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