Roblox Stock Dives After Allegations of False Metrics and Safety Issues

A prominent short seller, Hindenburg Research, revealed that it bet against Roblox, a kids' gaming platform, accusing the company of exaggerating user activity and failing to protect children from disturbing content. Roblox, with a market value of around $25 billion as of Tuesday, has seen its stock price plummet from its peak of over $75 billion in late 2021. The short seller's report, running over 15, 000 words, highlighted issues like inflated user engagement metrics and an "X-rated pedophile hellscape" on the platform. This led to shocking drops in Roblox's share prices, hitting an 8-week low before recovering somewhat. The firm hasn't responded to the allegations yet. In their report, Hindenburg found distressing games on Roblox using a child-registered account, including "Escape to Epstein Island" and "Run From Diddy Simulator, " referencing convicted sex offenders. This discovery underscored the platform's security concerns. As a company that blends social media with gaming, Roblox's safety measures are crucial, especially for its young user base. Hindenburg is known for its short positions that often result in stock drops on the day of their release. Previously, they have targeted other prominent firms like Cash App parent Block and car firm Nikola. The California-based Roblox, cofounded in 2004 by CEO David Baszucki, saw its valuation drop significantly following the accusations, shedding nearly $150 million of Baszucki's fortune as of Tuesday.