(Reuters) -Hindenburg Research announced a short position in Roblox on Tuesday, saying the gaming platform popular among young children had inflated its metrics, including user numbers.
Roblox shares fell 9.2% in early trading after the short seller said the company was merging daily active users (DAUs) with the number of people visiting its platform.
This was based on the definition that the metric does not measure “unique individuals who have access to Roblox,” Hindenburg said, adding that DAUs can include bots or alternate accounts.
Roblox did not immediately respond to a request for comment.
It is the latest target of Hindenburg, whose reports have sent shares of companies owned by billionaire investor Carl Icahn and India’s Gautam Adani plunging.
The short seller said he has also found multiple instances of bots from different countries using alternate accounts to “farm” goods in games on Roblox.
“Roblox lies to investors, regulators and advertisers about the number of “people” on its platform, inflating its key metric by 25-42%+,” Hindenburg said.
“We also show how it increases engagement hours, another key metric, by an estimated more than 100%.”
Roblox makes most of its money from in-game spending on its virtual currency, Robux, which is used to purchase cosmetic items in the game.
The company increased its annual booking 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 the second quarter ended June 30.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Leroy Leo and Arun Koyyur)