Securities Class Action Suit Filed Against Roblox

Written by:
Aaron Goldstein
Published on:
Nov/27/2023

Roblox, an online game platform and game creation system developed by Roblox Corporation allowing users to program games and play games created by other users, is named in a recently filed class action suit.

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The Complaint alleges that throughout the Class Period, Roblox reported strong bookings and revenue growth. The Company attributed this growth to various factors, including the positive effect from COVID stay-at-home orders, its technology investments, and “high-quality” gaming content.

However, Defendants misled investors by failing to disclose that a material portion of Roblox’s growth was due to weak content controls and the lack of spending restrictions on its platform. These inadequate controls enabled younger Roblox users to play games with inappropriate content and make unauthorized Robux purchases which translated into unsustainable levels of bookings and revenue.

In late September 2021, Roblox began to roll out enhanced user controls on its platform. Among other things, these new controls allowed parents to put monthly spending limits on their children’s Robux purchases.

Unbeknownst to investors, the implementation of these enhanced controls would inevitably cause Roblox’s bookings growth to decelerate in the fourth quarter of 2021 and throughout 2022.

On February 15, 2022, the truth about the Company’s unsustainable growth was revealed to investors when Roblox reported surprisingly weak fourth quarter 2021 results. Most of Roblox’s key metrics missed analysts’ expectations, including quarterly bookings and revenue, leading to a significant decline in the Company’s stock price and significant losses for investors.

The Complaint further alleges that statements made by Defendants throughout the Class Period were materially false and misleading when made because they misrepresented or failed to disclose certain issues.

Roblox was acccused of concocting an illegal gambling ring for minors this past summer.

Rachel Colvin and Danielle Sass filed a complaint against Roblox Corp in the US District Court for the Northern District of California in Mid-August.

“Children, who previously could not access the funds to participate in online gambling, now have, collectively, billions of Robux at their disposal,” Colvin and Sass said.

- Aaron Goldstein, Gambling911.com

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