Investment research and advocacy firm Hindenburg has criticized Roblox stock because the gaming platform misleads investors by exaggerating player numbers and presenting financial numbers as if the company is profitable. He said he was selling short.
According to a report released Tuesday, Roblox also offers various “experiences” and rooms that are inappropriate for minors, including “bathroom simulators” and “public pools” where players simulate sexual acts. He said the platform is a “pedophile hellscape” for minors. .
Roblox is misleading investors by confusing the number of “people” using its platform with the number of daily active users, and up to 30% or so of them may actually be bots. , Hindenburg claimed, quoting a former Roblox data scientist. According to multiple former employees, Roblox is able to track which users have multiple accounts and has a higher number of “users” while keeping the actual number of actual human users for internal purposes. The number has been made public.
A former Roblox data scientist reportedly said that Roblox’s user numbers had “inflated like crazy, crazy, in terms of engagement and DAU” due to bot activity from Vietnam. Hindenburg also accused Roblox of exaggerating the amount of “engagement time” on the platform. Roblox says each user spent an average of 2.4 hours a day last year. However, a technology consultant hired by Hindenburg tracked Roblox’s top 7,200 games and found data suggesting that the average 2.4 hour figure may actually be closer to 22 minutes. The report also claims that Roblox’s attempts to appear financially successful are inaccurate.
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A Roblox representative told PCMag in an email that the company “categorically denies the allegations in the report” and emphasized the company’s growth. “The financial claims made by Hindenburg Research are simply misleading. The authors are clearly short sellers (and have intentions regardless of Roblox’s business model or performance). Over the past four quarters, the Company’s bookings, cash and revenue increased by more than 22% from $780.7 million in Q2 2023 to $955.2 million in Q2 2024. Generated free cash flow of $576 million.
“A review of our GAAP balance sheet and GAAP cash flow statement makes that clear,” the Roblox representative continued. “The focus on cash reserves and free cash flow is a theme we have consistently focused on with our investors, going back to when we were a private company. Because no positive facts support their claims.” “
Hindenburg also accused Roblox of being “an adult-rated pedophile hellscape that exposes children to grooming, pornography, violent content, and extremely abusive language.” As a result, hundreds of player accounts were discovered bearing the names of sex offenders such as Jeffrey Epstein and Earl Brian Bradley, as well as suspected sex traffickers such as rapper P. Diddy.
Problematic games found on the platform include “Bathroom Simulator,” an “Adult” room where users allegedly traffic in child pornography, a pool where players get naked and simulate sex acts, These include “Escape from the Diddy Party,” “Escape to Epstein Island,” and “Therapy.” Rooms where players are lured into sexual conversations or encouraged to shoot up hospitals or abuse pregnant women or the homeless. PCMag was able to confirm the existence of dozens of bathroom simulator rooms and a number of Diddy-themed escape rooms on Roblox.
Roblox says 21% of its users are under the age of 9. However, because Roblox does not verify users’ ages by ID, it is also possible for players to lie about their age (claiming to be older or younger than they really are). This could mean that predators could pretend to be children, or children could pretend to be older to get around age restrictions.
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Hindenburg also spoke with Roblox’s moderators, who are “primarily” employees of call centers in Asia and who “are responsible for child grooming and bullying, with limited ability to permanently remove perpetrators from the platform.” It claims to have been asked to investigate “numerous cases”.
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However, Roblox also denied these claims, telling PCMag in a statement that its platform is “safe and secure.”
“We completely reject the claims in the report. Safety and civility have been the foundation of Roblox since its inception nearly 20 years ago, and the company has invested heavily in trust and safety initiatives throughout its history. Every day, tens of millions of people of all ages adhere to our Community Standards and have a safe and positive experience on Roblox. We take content and conduct very seriously and have implemented a series of proactive and robust safety measures designed to capture and prevent malicious and harmful activity on our platform. To learn more about our safety efforts, please see our recent blog post.
Roblox has previously been accused of having problems with child predators on its platform. He is also suspected of exploiting child labor and promoting gambling among minors. Parents also sued Roblox, claiming the platform was unsafe for children.
However, Roblox similarly denied these claims and instead claimed that it works hard to keep underage players safe online. The company is also steadily developing new AI tools, with over 250 already in use on its platform.
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About Kate Irwin
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I’m a reporter for PCMag, covering technology news early in the morning. Prior to joining PCMag, he was a producer and reporter at Decrypt, where he launched the company’s gaming division, GG. I’ve written for Input, Game Rant, Dot Esports, and more, covering a wide range of gaming, tech, crypto, and entertainment news.
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