Roblox sinks after short-seller slams online gaming platform for 'lying to investors' about key metrics

• Short-seller Hindenburg Research accused Roblox of "lying to investors" and inflating user data.
• Shares in the company fell as much as 9.4% on Tuesday.

Roblox stock dropped on Tuesday after short-seller Hindenburg Research accused the gaming platform of inflating user metrics and deceiving investors.

In its report, Hindenberg says that the popular online gaming platform has adopted a "growth at all costs" approach that has led it to deceive investors and tolerate dangerous material that puts younger users at risk.

"Since Roblox isn't profitable, its stock price (and, in turn, insiders' ability to dump hundreds of millions of dollars of stock) is reliant on the growth metrics it presents to Wall Street," Hindenburg said in a new report.

Shares in the gaming platform company fell as much as 9.4% in early intraday trading on Tuesday. The stock pared those losses to about 3% around 11 a.m. ET, and was trading at around $40.20 a share.

The short-seller alleged that Roblox's user number takes into account daily active users, which could include bots or players with multiple accounts.

"Our research indicates that Roblox is lying to investors, regulators, and advertisers about the number of 'people' on its platform, inflating the key metric by 25-42%+. We also show how engagement hours, another key metric, is inflated by an estimated 100%+

In addition to alleging inflated user info that has misled Wall Street investors, Hindenberg also claims the company has created a dangerous environment for users, specifically minors on the platform.

The short-seller called Roblox a "pedophile hellscape," claiming that children who play are exposed to grooming, pornography, violent content, and abusive speech.

"We totally reject the claims made in the report," a Roblox spokesperson said in a statement. "The financial claims made by Hindenburg Research are simply misleading. The authors are, admittedly short sellers (and have an agenda irrespective of the substance of Roblox' business model and results)."

The company also said that Roblox is a "safe and secure platform."