Roblox shares drop after Hindenburg research short report

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Roblox Corporation’s stock took a significant hit on Tuesday, falling by as much as 9.4% during intraday trading. The decline followed the release of a report from short seller Hindenburg Research, which claimed that Roblox has been inflating key metrics and that it lacks adequate safety measures to prevent harmful activity on its platform. This news has led to the stock reaching its lowest level since August, with a total loss of over 15% for the year.

Hindenburg’s report highlighted concerns around user safety and claimed that Roblox is vulnerable to misuse by pedophiles. The short seller also questioned the company’s reported growth figures. In response, Roblox issued a statement categorically rejecting the claims, pointing out that Hindenburg is a short seller with its own agenda.

Despite the negative headlines, Roblox pointed to its financial performance to counter the allegations. Over the past year, the company has seen its bookings grow by more than 22%, reaching $955.2 million in the second quarter of 2024. Roblox also generated $576 million in free cash flow during this period, metrics it has consistently focused on since it was a private company.

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Roblox maintains that it is a safe platform and that the financial metrics it reports are accurate, continuing to reject the criticisms made by short sellers.