Roblox stock drops after Hindenburg Research short report

October 08, 2024 10:59 AM -03 | By Investing
 Roblox stock drops after Hindenburg Research short report

Investing.com -- Roblox stock tumbled more than 9% in premarket Tuesday following a scathing short report from Hindenburg Research.

The report criticizes the online gaming platform for inflated user metrics, persistent losses, and serious safety concerns regarding child users.

Hindenburg's report points out that Roblox has not turned a profit since going public, with losses totaling $1.07 billion over the last twelve months.

Despite the company's market valuation of approximately $27 billion, Hindenburg highlights that Roblox's stock trades at 8.6 times sales, significantly above its gaming peers.

This pricing, the short seller argues, reflects unrealistic expectations for future growth and profitability.

The short seller alleges that Roblox has consistently misled investors about the number of users on its platform.

"Our research indicates that Roblox is lying to investors, regulators, and advertisers about the number of 'people' on its platform, inflating the key metric by 25-42%+," writes Hindenburg. "We also show how engagement hours, another key metric, is inflated by an estimated 100%+."

Hindenburg also claims that the platform's reported Daily Active Users (DAUs) are misleading, as they may include multiple accounts operated by single users.

"If that number [DAUs] is not de-alted, I think the actual one would be like anywhere between 30 to 20 percent lower," Hindenburg said a former data scientist told them.

The report also raises alarming safety concerns, alleging that Roblox's moderation systems are inadequate, leading to the exposure of children to inappropriate content and predatory behavior.

Hindenburg stated, "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."

Following its findings, Hindenburg Research said it has initiated a short position in Roblox.

This article first appeared in Investing.com


Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Limited, Company No. 12643132 (“Kalkine Media, we or us”) and is available for personal and non-commercial use only. Kalkine Media is an appointed representative of Kalkine Limited, who is authorized and regulated by the FCA (FRN: 579414). The non-personalized advice given by Kalkine Media through its Content does not in any way endorse or recommend individuals, investment products or services suitable for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a qualified financial planner and/or adviser. No liability is accepted by Kalkine Media or Kalkine Limited and/or any of its employees/officers, for any investment loss, or any other loss or detriment experienced by you for any investment decision, whether consequent to, or in any way related to this Content, the provision of which is a regulated activity. Kalkine Media does not intend to exclude any liability which is not permitted to be excluded under applicable law or regulation. Some of the Content on this website may be sponsored/non-sponsored, as applicable. However, on the date of publication of any such Content, none of the employees and/or associates of Kalkine Media hold positions in any of the stocks covered by Kalkine Media through its Content. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media.
The content published on Kalkine Media also includes feeds sourced from third-party providers. Kalkine does not assert any ownership rights over the content provided by these third-party sources. The inclusion of such feeds on the Website is for informational purposes only. Kalkine does not guarantee the accuracy, completeness, or reliability of the content obtained from third-party feeds. Furthermore, Kalkine Media shall not be held liable for any errors, omissions, or inaccuracies in the content obtained from third-party feeds, nor for any damages or losses arising from the use of such content. Some of the images/music/video that may be used in the Content are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music or video used in the Content unless stated otherwise. The images/music/video that may be used in the Content are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated or was found to be necessary.
This disclaimer is subject to change without notice. Users are advised to review this disclaimer periodically for any updates or modifications.

Sponsored Articles


We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.