Roblox Corp (NYSE:RBLX) shares moved lower after Hindenburg Research disclosed a short position in the gaming platform, alleging it inflated metrics including user numbers.
Hindenburg Research alleges that Roblox is intentionally conflating “people” with daily active users (DAUs).
“Our research indicates Roblox is lying to investors, regulators and advertisers about the number of ‘people’ on its platform, inflating the key metric by 25% to 42% plus,” Hindenburg Research said in its report.
“We also show how engagement hours, another key metric, is inflated by an estimated 100% plus.”
Hindenburg Research also alleged that Roblox is “compromising child safety to report growth to investors.”
“Our in-game research revealed an X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech,” it said.
“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.”
Roblox rejected the financial claims made in the report, stating they are “simply misleading.”
“The authors are, admittedly short sellers,” it said in a statement. “We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report.”
Shares of Roblox traded down 3.5% at $40 late morning on Tuesday.