Roblox stock falls after Hindenburg blasts the social gaming platform over bots and pedophiles

On Tuesday, Roblox—the gaming platform popular with Gen Z and Gen Alpha—saw its stock take a dive. Roblox stock fell 9.4% in early trading, even as it’s already dropped by 15% this year. As of midday trading, it’s down by around 3% today.

The dip comes after a new report from Hindenburg Research, which alleged the company inflated the number of users it has and how many hours they’re spending on the platform.

According to the report, which was based in part on interviews with former Roblox employees, the company may be inflating its numbers by allowing bots to populate the platform. Therefore, the gaming platform’s metrics do not come from “unique individuals accessing Roblox,” Hindenburg said.

Inflating its metrics isn’t the most damning part of the report’s allegations, however. The report also alleged that Roblox doesn’t do enough to protect kids from pedophiles via protections like safety screens.

Fast Company reached out to Roblox for comment but did not hear back by time of publishing.

It’s not the first time the accusation has come up. According to a recent Bloomberg report, dozens of arrests have been made over alleged abductions, abuse, or grooming that took place on Roblox.

Hindenburg claimed the company “is compromising child safety in order to report growth to investors.” As part of its research, it set up accounts under the names of well-known pedophiles. “As a test, we attempted to set up an account under the name ‘Jeffrey Epstein’ . . . only to see the name was taken, along with 900+ variations,” the report said.

Meanwhile, the report also argued that Roblox is “lying to investors, regulators, and advertisers about the number of ‘people’ on its platform, inflating the key metric by 25-42%+.” It also added that “engagement hours, another key metric, is inflated by an estimated 100%+.”

Since Hindenburg took a short position in the gaming company’s stock, the dip is a profitable one for the research firm. In a statement to CNBC, Roblox leaned into the fact that its stock falling is good for Hindenburg, saying the report serves the best interests of the research firm.

“The financial claims made by Hindenburg Research are simply misleading,” Roblox told CNBC. “The authors are, admittedly, short sellers . . . We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report.”