Shares in children’s videogame platform Roblox fell as much as 13% in premarket trading on Tuesday after short-selling firm Hindenburg Research disclosed a short position, accusing the company of inflating user metrics and engagement hours. In a lengthy report explaining the short bet, Hindenburg also accused Roblox of failing to implement sufficient safety standards for its underage users, exposing children to sexualized content and online predators that have been known to lurk on the platform.
According to the report, Roblox has misrepresented its daily active users by conflating unique individuals with other accounts, leading to an alleged 25-42% overstatement in user numbers and over 100% in engagement hours. This “massive inflation” of user activity skews the platform’s performance metrics, which can mislead investors.
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Roblox hosts millions of user-created games and offers extensive community features, allowing it to function as both a gaming platform and a kind of social media space—which means it is often subject to the same pitfalls as other social networks. In Hindenburg’s report, Roblox is accused of creating an “X-rated pedophile hellscape” rife with “requests to trade child pornography and engage in sexual roleplay fantasies with children.”
In August, Roblox was blocked in Turkey for allegedly allowing child exploitation on the platform, and the company has said it is working with local authorities to address the problem. During its own investigation, Hindenburg claimed to have found games called “Escape from Epstein Island” and the “Run from Diddy Simulator,” both accessible by children’s accounts.
Nevertheless, Roblox representatives deny any and all allegations about child safety, further claiming that Hindenburg’s financial report is “simply misleading.”
“We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report,” a company spokesperson said.
Roblox went public in 2021 with a valuation of $45 billion, which climbed to $75 billion later that year. It was listed alongside other “pandemic darling” stocks that shot up in popularity at that time. Since then, company value has dropped significantly, and Roblox now has a valuation of $27 billion with net losses totaling $1.07 billion since its public debut.
Connor Walcott is the lead writer for Valuetainment.com. Follow Connor on X and look for him on VT’s “The Unusual Suspects.”
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