Hindenburg Research’s scathing report on Roblox has spread like wildfire across the games industry. At a glance, it appears to be deep investigative reporting, but in the end was an activist short-seller looking to make a quick buck. 📝 The report focus on two things: inflated user numbers and inappropriate content. It claims that Roblox has been misleading investors by inflating the number of active players to the tune of 25-42% and average daily time spent per player by 6.5x. It details a number of searches the firm conducted that yielded inappropriate content, as well as rehashes reports discussing predator activity on the platform. 🤓 Investors and operators alike already knew that the engagement numbers were inflated - because Roblox told us so Roblox themselves state in their earnings that user numbers are higher than actual people due to bots and players having duplicate accounts (as do Facebook and all other social media platforms). Hindenburg debunks Roblox's claim that players play an average of 2.4 hrs per day, and while brand advertisers may be disappointed, it doesn’t change the fact that Roblox is still the best place to reach Gen Z and Alpha. 🏦 Actually, Hindenburg is making the case for Roblox: fewer users would mean more room to grow One of the biggest concerns to investors about Roblox's size is that it can't get any bigger: 10% of the world's Unders 30s are already active users. Notably, this report did not undermine Roblox's bookings growth so inflated users would simply mean that average bookings per DAU is actually higher, with less market saturation. 🎯 More work is required on the moderation side, but the Hindenburg report did little to present new information to investors, which is why the Roblox stock only dipped by 6% temporarily before returning to normal today. Furthermore, it's again worth emphasizing that Hindenburg has taken a short position on Roblox, meaning they benefit if they can hurt Roblox's stock price. For now, it appears they took the wrong position.
Nic Mitham
2mo
What are your thoughts on Roblox over exaggerating the average user age and implying that older users are using the platform, in order to attract 'older brands'? I don't think 13+ users are bothered with Roblox.
C. B.
2mo
David Taylor I have no position in this financially.. my sideline comments I wouldn't be surprised if the report was in fact accurate. Regardless of their potential conflict on financial gain it aligns with typical behavior of companies in this category. As well as common knowledge the problems with content (and player behavior) that Roblox has not and probably never will address. Let's ignore brand damage for a minute and just talk hard numbers. If their CAC isn't increasing (too much) and revenue is up and costs aren't increasing past some expected rate... Greedy numbers perspective.. who cares? We'll see how the market responds
Bob Holtzman
2mo
As a parent and shareholder, I am very much concerned about the moderation going on. I would like to see Roblox do more here.
Phillip Black
2mo
Light it up 🚒 🔥 they need to give a reason for the *share* of bots to increase for change over change dau to become a unreliable metric.
Ben Sarraille
2mo
When is the DT hedge fund starting? I’m in for at least $5
Steve Chandler
2mo
They skipped the most important part anyway: Roblox is child labor, and should probably be shut down. This business turns minors into cogs in a content machine, and makes a percentage of the real money that other minors are paying them. It's pretty obviously exploitative, and there's a reason we have laws about how you can advertise to children. But Roblox is doing the whole "tech company outpacing regulation" thing so nobody is addressing it.
Rafael Brown
2mo
The key question that needs to be asked is very simple actually, “when will there be profit?” And what is the road or path to profitability? Roblox has existed now for 20 years without turning a profit in any single quarter either while private or public. If Roblox is going to survive off of investor largesse while, trying to show growth that justifies the lack of profit, then is active deception around growth, a valid strategy for a company that should be attempting to maintain investor goodwill? Is deceiving ones public shareholders, a valid and legal strategy when they are trying to assess the value of the company and it’s potential push to profitability? And how does Roblox repair trust if they’ve been keeping two sets of books and cooking one set that they dispense out to investors?
Rocco Strydom
2mo
Meanwhile they build their short positions, they know what they are doing and they are very good at it
Serkan Ferah 👾
2mo
I would be very cautious about this. Wirecard scandal had started exactly the same way. The investor and industry reaction was exactly the same to the first reports published by short sellers. Yet, we know what happened in the end. There’s is now smoke…It doesn’t mean the claims are correct or false but the next few years will be critical.
CEO & Founder at Symbol Zero // Microsoft Regional Director
2moRemember the old adage, “where there is smoke, there is fire”? A group like Hindenburg doesn’t take a position randomly. They do it because they see a combination of weakness and deception. and I have yet to see anyone dispute their numbers. Meanwhile, it is disingenuous to suggest that faked numbers were understood to be fake by the majority population when no one mentioned their fakery before. I have seen a variety of people quote Roblox numbers without giving any disclaimer of inflation, fakeness, exaggeration, or any other caveat, including the original poster. In fact, I’m not aware of anyone who has stated that the Roblox numbers are intentionally pumped up. So if this was known, then omitting it is a form of lying. If it was not known then it is actually news and downplaying it is disingenuous for the severity of the claim.