Robloxthe online gaming platform that has won millions of users around the world, has found itself at the center of a controversy after the publication of a report accusing it of providing false data to investors. HindenburgResearchan investment firm known for its “short selling” activities, claims that Roblox inflated the number of active users on the platform by including fake accounts and bots in the count.
The Hindenburg Research report, released Tuesday, said Roblox allegedly “consistently overestimated the number of people on its platform by 25% to 42% or more.” Roblox, which went public in 2021, reported 79.5 million daily active users in its latest earnings report. However, Hindenburg claims that Roblox “intentionally confuses” real people with daily users, as that number could also include alternative accounts and bots. The research claims that Roblox is able to separate alternative accounts from individual users, although the company states that daily active users are “not a measure of unique individuals accessing Roblox.”
Roblox’s answer
Hindenburg Research is a company specializing in “short selling”, a practice that consists of selling borrowed shares by betting on their decline. She is known in the industry for publishing critical reports on companies in which she identifies alleged irregularities, profiting from the resulting decline in share value. An example is the case from 2020, when Hindenburg accused the electric vehicle startup Nikola of fraud. Subsequently, an investigation by the Securities and Exchange Commission (SEC) confirmed the scam, which resulted in a four-year prison sentence for its founder, Trevor Milton.
Roblox predictably rejected the allegations in the report. Desiree Fish, communications manager at Roblox, told The Verge: “We completely reject the claims in the report. The financial claims made by Hindenburg Research are simply misleading. The authors are, admittedly, short sellers and have an agenda regardless from the substance of Roblox’s business model and results.”
In addition to allegations of manipulation of user data, Hindenburg’s report also raises concerns about the safety of minors on the platform. The company claims that Roblox is not doing enough to protect children, claiming that its research into the game has revealed dangers of pedophilia, “exposing children to grooming, pornography, violent content and extremely offensive language.” Roblox shares fell following the release of the report.
Last week, a financial newsletter also accused Roblox of promoting child abuse. At the time, Roblox spokesperson Eric Porterfield denied allegations that child endangerment is a widespread problem on the platform, saying that Roblox frequently updates its security practices to “identify and prevent malicious activity.”
The issue is only just beginning so continue to follow us for all the updates on the case. In the meantime, as always, let us know in the comments what you think about Roblox and the accusations made by Hildenburg Research.
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