It looks like the popular video game platform Roblox might be in serious trouble. Hindenburg Research, known for its detailed financial analysis and short-selling of the companies it reports on, has published its latest report based on Roblox.
For starters, Roblox is an online video gaming platform that allows users to create and play games made by other users. The company claims that it has around 79.5 million daily active users (DAUs), while it also offers a virtual currency called Robux that players can use to purchase in-game items.
In its report, Hindenburg Research says that Roblox might be exaggerating its user numbers and that the company could be counting multiple accounts owned by the same person as separate users, while the actual number could be much lower—by as much as 42%. The number of accounts reported by Roblox is around 6.5 billion, which Hindenburg says, "is a number approaching Earth"s population", and there are clearly "alt" and/or bot accounts, it is merely a question of how many.
Roblox also reported that players spend a lot of hours on its platform, which is typically considered a good sign for user engagement. However, Hindenburg claims that these numbers might also not be accurately reported.
Hindenburg says that Roblox"s financial performance also looks to be very concerning. Roblox reportedly made around $2.8 billion in revenue in 2023, an increase from $2.2 billion in 2022. Even with this growth, the company hasn"t made a single quarter of profit since going public in 2021. Instead, it has lost around $2.6 billion over three years.
Hindenburg"s investigation also suggests that Roblox might be using two different sets of data, one for internal use and another for reporting to investors to misinterpret how the company is really performing.
Since going public, insiders at Roblox (like its executives and board members) have sold about $1.7 billion worth of their shares, which Hindenburg has called a "red flag" in its report. Roblox has also seen a lot of changes in its leadership recently, including the departure of its Chief Financial Officer and other key executives. This raises even more concerns about the company"s stability as frequent changes in the top management could indicate there are deeper problems in the company and that the company isn"t really fully transparent about them.
Hindenburg Research is well-known for short-selling the companies it reports on, and Roblox"s stock has indeed dipped since the release of the report. As of writing this article, Roblox"s stock price has dropped by about 9.2% to around $37.69.