Roblox Under Active SEC Investigation, Report Says: Retail Braces For Further Stock Decline

Roblox, Inc.’s (RBLX) stock is in the spotlight yet again after a recent report broached an SEC investigation into the San Mateo, California-based company. 

The immersive gaming and creation platform is part of an “active and ongoing” SEC investigation, Bloomberg reported, citing a letter from the SEC on Friday received in response to a “Freedom of Information Act” (FOIA) request.

However, the securities regulator declined to share correspondence between itself and the Department of Enforcement staff due to the potential harm it could cause to the ongoing enforcement proceeding. 

The report comes nearly three months after Hunterbrook Media said a FOIA response from the SEC confirmed that its Division of Enforcement had engaged in “investigative matters” related to Roblox. The securities watchdog said it had ‘9,237 pages of responsive records’’ related to Roblox but refused to share any additional details, reasoning that it might interfere with law enforcement investigations. 

The Federal Trade Commission (FTC) is also investigating Roblox, following a complaint lodged by the watchdog group Truth in Advertising. The complaint alleges that Roblox allowed brands to create in-game advertisements that were not clearly disclosed as such, potentially misleading users, especially children. 

Roblox stock has been under pressure since Thursday as key user metrics and bookings disappointed despite the fourth-quarter headline beat. Sell-side analysts reacted mostly positively after the post-earnings sell-off, upping the price targets and recommending buying the dip. 

On Stocktwits, retail chatter about the investigation continued unabated. 

One user raised the possibility of a “very, very bad” Monday for the stock.

Another predicted a “bloody” Monday but thinks the stock could recover following the investigation and potentially positive earnings reports in the future. 

Roblox stock ended Friday’s session down 1.25% at $66.28. The stock is up 14.5% so far this year.

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