Why is Roblox (RBLX) stock price crashing?

Core Viewpoint - Hindenburg Research has released a report alleging that Roblox has inflated its user metrics, which could pose risks for advertisers and the company's reputation [1][3]. Group 1: Allegations of Inflated Metrics - Hindenburg Research claims that Roblox has overstated its daily active users (DAUs) by 25% to 42% to attract advertisers, suggesting that the actual user growth is stalling [3]. - Roblox asserts it has over 65 million DAUs, but Hindenburg indicates these figures may be exaggerated, with evidence of bots allowing individuals to manage multiple accounts [3]. - Roblox's disclosures state that DAUs are not a measure of unique individuals, and former employees have indicated that the company tracks multiple accounts internally [3][4]. Group 2: Engagement Metrics Concerns - The report questions Roblox's claim of an average engagement of 2.4 hours per user per day, which is 58% higher than the average gaming time for its target demographic of 8 to 12-year-olds [4]. - If accurate, this engagement metric would surpass popular social media platforms by 26% to 166%, raising further doubts about its legitimacy [4]. Group 3: Risks for Advertisers - The inflated metrics could undermine advertiser confidence, threatening a significant revenue stream for Roblox [5]. - Companies may face lower returns on ad spend and reputational risks by associating with Roblox, especially given the presence of inappropriate content on the platform [5]. Group 4: Insider Activity and Management Changes - There has been a notable increase in insider selling over the past year, alongside the resignation of key executives, including the CFO, CTO, and CMCO [5][6]. - The overall outlook for Roblox appears bleak, with potential regulatory scrutiny and investor mistrust likely to follow the report's findings [6].