Roblox Accused of Inflating User Metrics and Hosting Inappropriate Content
Roblox, the popular gaming platform, is facing serious allegations from Hindenburg Research. The short-selling firm has accused Roblox of not only hosting inappropriate content, but also of inflating key user metrics, which have contributed to the company's stock price since its direct listing in 2021.
Allegations of Inflated User Metrics
Hindenburg Research alleges that Roblox has been dishonest about the number of users on its platform, inflating the metric by 25-42%. The firm also claims that Roblox has inflated its engagement hours by over 100%. Hindenburg argues that as Roblox is not profitable, its stock price is reliant on the growth metrics it presents to Wall Street.
To support its claims, Hindenburg hired a technical consultant to monitor the top approximately 7,200 Roblox games across roughly 2.1 million servers, collecting nearly 300 million rows of real-time player data. The data suggests that Roblox could be greatly overstating the true level of user engagement across its platform. The review found that an average of 30.4 million unique daily users spent just about 22 minutes in games per day.
Claims of Inappropriate Content
In addition to the allegations of inflated metrics, Hindenburg has called Roblox's in-game experience an "X-rated pedophile hellscape," alleging that the platform exposes children to grooming, pornography, violent content, and extremely abusive speech. The firm conducted its own checks to see if the platform had addressed these issues.
Hindenburg claims that by simply searching 'adult' in the Roblox search bar, they found a group called "Adult Studios" with over 3,000 members openly trading child pornography and soliciting sexual acts from minors. They also found 38 Roblox groups, one with over 100,000 members, openly soliciting sexual favors and trading child pornography.
The firm alleges that children are exposed to adult content, as the chatrooms trading in child pornography had no age restrictions. Roblox reports that 21% of its users are under the age of 9, a number that Hindenburg believes is likely underestimated given that Roblox has no age verification aside from users seeking 17+ experiences.
The report also mentions a game available to all ages called "LGBTQ+ Vibes" which has accumulated over 40.6 million visits and over 224,000 favorites. Users regularly described lewd sex acts while others used hateful slurs, according to the report.
Violent Content and Financial Losses
Hindenburg's report also details violent content on the platform. In one game called "Beat Up The Pregnant", users allegedly attacked pregnant women in a parking lot with machetes or killed them with frying pans or guns.
The short-selling firm also criticizes Roblox's valuation, pointing out that the company has reported net losses every quarter since becoming a public company, with losses over the last twelve months totaling $1.07 billion. Despite this, its stock trades at 8.6x sales, a 57% premium to gaming peers, pricing in expectations of rapid future growth and profitability.
Insider Stock Sales
Hindenburg also notes that Roblox insiders have cashed out $1.7 billion in stock since the company's 2021 direct listing.
Bottom Line
These allegations against Roblox are serious and could have significant implications for the company if proven true. The safety of children on gaming platforms is of paramount importance, and companies must take responsibility for ensuring their platforms are safe and appropriate for all users. The question is, what steps will Roblox take in response to these allegations? Share your thoughts on this issue and consider discussing it with your friends. Don't forget to sign up for the Daily Briefing, delivered every day at 6pm.
