Roblox (RBLX) stock is declining today on previously undisclosed news that the U.S. Securities and Exchange Commission (SEC) has begun an investigation into the digital gaming platform. According to a new report from Hunterbrook, a recent Freedom of Information Act (FOIA) request has caused the agency to disclose that it “engaged in investigative matters” regarding Roblox after previously stating that it did not have any records on the company.
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So far, few details of the investigation have been provided. But Hunterbrook also reported that the SEC isn’t the only regulatory agency currently looking into Roblox.
What’s Happening with Roblox Stock?
Roblox stock has been trending downward all week since the company announced that it would be adding new parental controls to its platform. Now, news of the SEC investigation is pushing shares down even more. As of this writing, RBLX stock is down 5% for the day and is on track to close out trading in the red. This follows a volatile week during which time Roblox has mostly struggled, failing to garner enough momentum to stay in the green.
The parent controls followed a claim from short seller Hindenburg Research that Roblox had prioritized growth over the safety of its child users. Now Hunterbrook is reporting that the company is facing investigations from both the SEC and the Federal Trade Commission (FTC), a government agency tasked with ensuring fair business practices. The outlet notes that “Roblox does not appear to have disclosed either of these investigations.”
Attempting to conceal multiple federal investigations suggests that Roblox may be in more trouble than it wants its investors to know. If these probes persist, they are likely to drag RBLX stock down, even if no illicit activity is uncovered. If Roblox is found to have engaged in anything illegal, shares could plunge and have a difficult time recovering.
Wall Street Is Mostly Bullish on RBLX Stock
Turning to Wall Street, analysts have a Moderate Buy consensus rating on RBLX stock based on 16 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 30% rally in its share price over the past year, the average RBLX price target of $56.50 per share implies 15% upside potential.
