Hindenburg Research disclosed a short position in Roblox on Tuesday, alleging that the gaming platform popular among young children inflated metrics including user numbers.
Roblox shares fell 9.2% in early trading after the short seller said the company conflated daily active users (DAUs) with the number of people visiting its platform.
This was based on its definition that the metric is not a measure of “unique individuals accessing Roblox”, Hindenburg said, adding that DAUs could include bots or alternate accounts.
CNBC could not immediately verify Hindenburg’s claims or short position. Roblox said it totally rejects the claims made in the report.
In a statement to CNBC, the company said, “The financial claims made by Hindenburg Research are simply misleading. The authors are, admittedly short sellers… We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report.”
It is the latest target of Hindenburg, whose reports have knocked shares of companies owned by billionaire investor Carl Icahn and India’s Gautam Adani.
The short seller said it has also found multiple instances of bots from different countries that use alternate accounts to “farm” for goods in games on Roblox.
“Roblox is lying to investors, regulators, and advertisers about the number of “people” on its platform, inflating the key metric by 25-42%+,” Hindenburg said.
“We also show how engagement hours, another key metric, is inflated by an estimated 100%+.”
Roblox makes most of its money from in-game spending on its virtual currency, Robux, which is used to purchase cosmetic items within the game.
The company raised its annual bookings forecast in August as it benefits from strong spending on the various games available on the platform.
It had 79.5 million DAUs, as of its second quarter ended June 30.
CNBC’s Steve Kovach contributed to this report.
