Roblox Corporation (NYSE:RBLX) shares plunged over 9% intra-day today following a critical short report from Hindenburg Research, which accuses the online gaming company of inflating user metrics, struggling to manage its finances, and failing to safeguard young users on its platform.
The report underscores Roblox’s financial struggles, highlighting losses of $1.07 billion in the past year alone. Despite a market valuation of about $27 billion, Hindenburg argues that Roblox’s 8.6x sales multiple far exceeds that of its gaming industry peers and reflects unsustainable growth and profit expectations.
Hindenburg alleges that Roblox has consistently overstated its user base, inflating its key metrics by between 25% and 42%. They further claim that the platform’s engagement hours are also overstated, with data suggesting they could be exaggerated by over 100%.
The short report also raises concerns over safety, pointing to inadequate content moderation that may expose young users to inappropriate material and potentially predatory behaviors. According to Hindenburg, these vulnerabilities compromise Roblox’s reputation and increase regulatory risk, casting a shadow over the company’s operational integrity and future viability.