Hindenburg Research on Tuesday disclosed a short position in Roblox, blaming the gaming platform Popular among young children Increased metrics including user numbers and engagement.
Shares of Roblox fell as much as 9% after the short seller said the company equated daily active users (DAU) with the number of people visiting its platform.
The stock was recently down 3% at $40.06.
This was based on its definition that the metric is not a measurement of “unique individuals accessing Roblox”. Hindenburg saidHaving said that, DAU may include bots or alternative accounts.
A Roblox spokesperson denied the allegations.
It is Hindenburg’s latest target, with shares in the companies it owns falling on the report Billionaire-investor Carl Icahn And Gautam Adani of IndiaAs well as AI-server maker Super Micro Computer.
“Roblox is lying to investors, regulators, and advertisers about the number of “people” on its platform, inflating key metrics by 25-42%,” Hindenburg said.
The short seller said it also found several examples of bots from different countries using alternative accounts to “farm” for in-game goods on Roblox.
The short seller said that the platform promotes games that do not require active participation from users and artificially increases engagement by linking developer payments to it.
Unlike traditional video game companies, Roblox relies on user-generated content to drive engagement and makes most of its money from in-game spending on its virtual currency, Robux.
The company raised its annual booking forecast in August as it benefited from strong spending on various games available on the platform. As of June 30, it had 79.5 million DAUs.
Wedbush Securities analyst Michael Pachter said, “There are a lot of interesting points in that report, but they get a lot of things wrong about how the games work.”
He said Hindenburg measured engagement based on “sessions”, but gamers typically log on and off multiple times a day and play more than one game.
“The Hindenburg test looks like it measured the session length for one game for each user,” Pachter said.
