#284: Lead Balloon

Another proof that nothing can bring Roblox down to earth.

Yesterday, an organization called Hindenburg Research released a scathing report on Roblox Corp, claiming that the company behind one of the largest gaming platforms in the world has deliberately overestimated its user statistics for years to deceive Wall Street that executives sold shares before the inevitable iceberg emerges, and that a dismally lax attitude to moderation and child safety has exposed the public, the majority of whom are under 17 years of age and 20% of whom are under 9 years of age, to what they call ‘a X-rated p(a)edophile hellscape”. I don’t recommend reading the full report unless you have a particularly strong bladder; it’s stunningly long and absolutely piss-boiling.

It should be noted that Hindenburg’s intentions here are not entirely pure. As its name implies, it is in the business of inflating things it considers dangerously exaggerated: it shorts companies it suspects of foul play, publishes devastating revelations about their nefarious dealings, and cashes in. It published a similar publication early last year. investigation into the activities of Indian billionaire Gautam Adani. Hindenburg’s accusations of stock manipulation – which becomes more and more ironic the more I think about it – and “sky-high” valuations have wiped $100 billion off the value of Adani’s companies, and Hindenburg made just over $4 million worth of short-selling shares in his companies, which doesn’t really sound like much in the scheme of things, but fine. It admits in yesterday’s report that it has also taken a short position in Roblox. So perhaps a little skepticism is in order.

But also… is that really the case? While there is new information here, much of it based on revelations from former Roblox staffers, much of it is just repeating things that those of us with our fingers on the pulse already knew. Followers of the diligent work of People make games already know that the platform owes much of its success to the endemic exploitation of child labor. Roblox’s problem with sexual predators has been well documented for years and was detailed in a Bloomberg research from a few months ago. And while the extent to which his absurd stock market performance deviates from his actual health has never been so explicitly detailed, Hindenburg claims that Roblox is overestimating its daily active user numbers by as much as 40% by missing out on obvious bot activity. as a human being, and accuses it of lying to the SEC about its ability to distinguish between individual users and alt accounts – it’s been self-evident for years that there’s something rotten in Roblox’s crudely rendered, riddled Denmark.

Roblox went public in 2021 and has yet to post single quarterly earnings, although admittedly this hardly makes it an outlier in today’s fantastic stock market, which can banish all kinds of bad omens provided enough of the other line graphs move up and to the right. But remarkably, Wall Street and the more brain-wormed members of the Valley venture bro set seem absolutely fine with the fact that the bigger Roblox gets – the more users it acquires, and the more money it makes – the more money it puts on the trying to lose somehow. It’s true! I have data and graphs and stuff!

I am, as my bank manager will happily tell you, not a financial expert. But I remain baffled as to what the so-called experts in this field consider to be a successful business. If I somehow managed to turn a 25% pay increase into a 24% bigger loss, like Roblox did in 2023, I and the people around me would consider me a complete failure . I am certainly less likely to be approved for a mortgage or loan. But if I could somehow float myself on Wall Street, they would all line up for a piece of the action. What a world.

I understand that these figures are also massaged; it apparently has something to do with the way Roblox Corp defers revenue from the sale of Robux, the virtual currency, although I think today’s edition is dry enough without trying to make sense of any of that. And certainly, there’s one school of thought that Roblox Corp is only guilty of: successfully gaming the patently broken financial system in which it operates, and that its litany of shortcomings are just the costs of doing its particular brand of business. Large online companies will always have a problem with bots and alts; UGC platforms will always attract bad actors and scammers; Where children gather, predators are sure to follow. Just the way things are, old fruit. There’s nothing to do.

And indeed, the people who matter have already decided that this changes nothing. After briefly dropping 10% yesterday, Roblox stock rallied to end the day down just 2%; This was also found this morning. Maybe Hindenburg, and a few others, made a few bucks from the whole venture, but other than that, this was a bit like a sitcom episode: a lot of stuff happened and we all ended up back where we started. Roblox has since had a statementlying about his commitment to child safety and poking holes in some of Hindenburg’s claims, but it all feels mostly like keeping up appearances. They know that’s not actually necessary Doing everything, really. This whole sad enterprise is working exactly as it should, and there is nothing you, or I, or Hindenburg Research can do about it. The train continues to move regardless.

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