Roblox is facing accusations that it lied to investors about the number of people who use the platform. In a report published on Tuesday, the investment firm Hindenburg Research claims Roblox is “consistently overstating the amount of people on its platform by 25 percent to 42 percent or more.”

Roblox, which went public in 2021, reported having 79.5 million daily active users in its most recent earnings report. However, Hindenburg claims Roblox “intentionally conflates” actual people with daily users, as that number could also include alt accounts and bots. The research alleges that Roblox can separate alt accounts from single users, even though the company’s disclosure says daily active users “are not a measure of unique individuals accessing Roblox.”

Hindenburg is an activist short-selling firm that infamously publishes research when it says it’s identified something shady about a business, allowing it to make a profit as its share value declines. One example is from 2020, when Hindenburg accused the EV startup Nikola of fraud. Subsequently, an investigation by the Securities and Exchange Commission (SEC) resulted in a four-year prison sentence for its founder, Trevor Milton.

“We totally reject the claims made in the report,” Desiree Fish, Roblox’s chief communications officer, said in a statement to The Verge. “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’s business model and results.” You can read the statement in full at the bottom of this article.

The firm also claims Roblox isn’t doing enough to protect children on the platform, alleging its “in-game research revealed an X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech.” Roblox shares dipped following the release of the report.

Last week, a financial newsletter also accused Roblox of enabling child abuse. At the time, Roblox spokesperson Eric Porterfield denied claims that child endangerment is a widespread issue on the platform, saying it frequently updates its safety practices to “catch and prevent malicious activity.”

Here’s Roblox’s full statement:

We totally reject the claims made in the report. 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’s business model and results. Over the past four quarters our bookings, the amount of cash receipts, have grown over 22% from $780.7 million in Q2 2023 to $955.2 million in Q2 2024. Over the same time, cash provided by operating activities have totaled $646.3 million, free cash flow was $440.3 million, and we have guided to even higher numbers for fiscal 2024. An examination of our GAAP balance sheet and our GAAP cash flow statement makes that clear. The focus on cash bookings and cash flow are themes that we have focused on consistently with investors dating back to our days as a private company. The author made no attempt to highlight any of that because the positive facts simply don’t support their agenda. 

Update, October 8th: Added a statement from Roblox.