Roblox Corp shares slumped on Tuesday after short seller Hindenburg Research said it’s betting against the gaming platform.
 
The stock fell as much as 9.4% in intraday trading on Tuesday in New York, hitting the lowest level since early August. The online gaming company’s stock has shed more than 15% so far this year. 

Hindenburg said in its report that Roblox has inflated key metrics and alleged that it doesn’t have sufficient safety screens to prevent paedophiles from using the platform. 

“We totally reject the claims made in the report,” a Roblox spokesperson said in a statement. “The authors are, admittedly short sellers [and have an agenda irrespective of the substance of Roblox’ business model and results].”

Over the past four quarters, Roblox’s bookings, or the amount of cash receipts, have grown more than 22% to US$955.2 million in the second quarter of 2024 from US$780.7 million a year earlier, according to the company. During the same time, the company generated US$576 million of free cash flow. Those metrics are themes Roblox has focused on consistently with investors since it was a private company, according to the spokesperson.  

“We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report,” the spokesperson said.

Roblox has been the target of multiple cautious reports from The Bear Cave, a financial newsletter that caters to the short-selling community. Edwin Dorsey, who runs the site, first published a contrarian report about the gaming platform in 2022. Dorsey said he doesn’t take positions against companies profiled in the newsletter.

  - Bloomberg