A class action lawsuit was filed against Roblox Corporation (RBLX) on June 10, 2024. The plaintiffs (shareholders) alleged that they bought RBLX stock at artificially inflated prices between November 15, 2023 and May 8, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Roblox stock during that period can click here to learn about joining the lawsuit.
Roblox operates an immersive entertainment platform that enables users to come together to play, learn, explore, and communicate by engaging in games built by developers. As of March 31, 2024, Roblox claimed to have 77.7 million daily active users who collectively contributed 16.7 billion in engagement hours on games created by 2.6 million developers.
Roblox’s Misleading Claims
The plaintiffs maintain that Roblox and four of its senior officers (Individual Defendants) deceived investors by repeatedly making false and misleading public statements about the company’s business practices and prospects during the Class Period.
As per the lawsuit, the defendants made tall claims about the company’s growing bookings during the time in question. For instance, during its Q4 FY23 results released on February 7, Roblox guided for full-year Fiscal 2024 bookings in the range of $4.14 to $4.28 billion. The company also noted that its revenues jumped 30% year-over-year in Q4, while bookings of $1.13 billion increased 25%. The CEO noted that the company finished the quarter with record bookings and expects the momentum to continue in Fiscal 2024.
Here’s How the Truth Was Revealed
The lawsuit accuses the defendants of omitting truthful information about certain financial metrics from SEC filings and related material. According to the lawsuit, the company’s claims about its bookings are at the heart of the case.
The truth was revealed on May 9, 2024, when Roblox released its Q1 FY24 results. Roblox missed the revenue estimates but reported a narrower-than-anticipated loss. The company slashed its full-year Fiscal 2024 bookings guidance to the range of $4 billion to $4.1 billion. Moreover, its Q2 FY24 revenue and bookings outlook came in lower than the analysts’ consensus. Overall, the guidance was in contrast to the aforementioned bullish forecast issued by the company during the Q4 FY23 results.
The disappointing results and forward guidance made two analysts cut their price targets on RBLX stock on May 9. Over the next few days, several analysts revisited their price targets on the stock, while a few even downgraded their recommendations.
Accordingly, RBLX shares plunged over 24% in intraday trading on May 9, causing massive damage to shareholders’ returns. Over the past year, RBLX shares are down 12.2%.
