Roblox is... evil?
Hindenburg Research dropped a report on Roblox last week. It was damning. This is, of course, the MO for Hindenburg that releases exposés as it also shorts the stock, standing to gain from the companies’ loss.
Some quick highlights from their detailed report; they accuse Roblox of:
Inflating the number of uniques- “consistently overstating the amount of people on its platform by 25 percent to 42 percent or more”
Failing to account for alternate and bot accounts, despite internal tracking.
Overstating engagement hours by 100%.
Compromised child safety- “in-game research revealed an X-rated pedophile hellscape.”
Expectedly, there has been much chatter on this. A flood of voices have taken the opportunity to bemoan these known issues, especially around child safety.
While there is the clear caveat the Hindenburg stands to profit from this report, there seems to not be a lot of actual disputing of what the report contains- deception in numbers & a swathe of unsafe content for minors, with guardrails that are persistently insufficient or ineffective.
The stock fell & recovered. Some say this is the market recognising the criticisms as “foundational problems of how we operate online”, the general thinking being that ”Hindenburg is not wrong to question the viability of Roblox, but their mechanism for doing so misses the mark.” This is part of the wider argument that goes something like, “this is the internet, so get real guys. Yes its not great, but hey why aren’t you going after other platforms?”.
I have viewed Roblox with much positivity from afar (and am teetering on the edge of my kids entering its world). So without any preconceived bias either way, my take: wide ranging or systemic problems cannot absolve individual players. The problem becomes more acute when it is a platform specifically for children, with a large percentage below 13 years. With that demographic, expectations are (and must be) different.
“Everybody else is also screwing up” doesn’t quite cut it.
As for the ‘everybody else’? The Hindenburg report itself tellingly states, "Overall, we think Roblox has adopted the Silicon Valley approach of ‘growth at all costs’”.
And over at The Information, they say a reckoning is coming- “after years of cashing in on social media’s popularity, tech companies may find the bill is coming due.”.
Hindenburg Research has established itself as one of the most powerful voices in public activist short-selling, hammering the share prices of multiple big name companies in recent years with its blockbuster reports. It has also developed a reputation for its fearlessness, regularly launching big public short bets and serious allegations despite the potential minefield of litigation.