Roblox shares tumble after short seller Hindenburg accuses it of inflating user metrics
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Counting Robux… Roblox stock dropped as much as 9% yesterday after a report from noted short seller Hindenburg Research accused the gaming platform of misleading investors and regulators about its user #s. In announcing a short position in the tween-favorite platform, Hindenburg is betting the stock will fall. And fall it did after Hindenburg published its scathing report, alleging that Roblox is “consistently overstating the amount of people on its platform.” It also called it “a pedophile hellscape.”
Hindenburg said Roblox may be including bots and alt accounts in its user #s, though Roblox discloses that daily active users “are not a measure of unique individuals.”
Roblox said it “totally” rejected the allegations, adding that Hindenburg is a short seller with an agenda.
Don’t sell yourself short… sell others short? Short sellers are kind of like investigative journalists… but with major conflicts of interest. Short-selling firms like Hindenburg pick companies whose stocks they believe will fall, and then make trades hoping to profit on that belief. Hindenburg is infamous for publishing reports explaining why it’s shorting certain companies (often it says it found out something sus about the biz). Roblox is far from its first target. One consequential example:
In 2020, Hindenburg dropped a 67-page report accusing Nikola of exaggerating the readiness of its electric-truck tech, calling it “an intricate fraud.” It led to an SEC investigation that resulted in a four-year prison sentence for the startup’s founder.
Short reports can move markets… Indian tycoon Gautam Adani saw $80B of his wealth wiped out after Hindenburg accused his conglomerate of accounting fraud. Block shares plunged after Hindenburg said it had inflated Cash App user #s. Short reports can improve transparency and accountability, but the firms behind them are driven by their own incentives.