RBLX (Roblox) Controversy and potential consequences
Updated
Exposition
This is a complex issue and I hope you will visit the two videos I linked, listen to them and the genuine complaints they have, and what consequences they may entail for the value, and public sentiment, of stock prices in the near and long term future, particularly long term.
This is a purely informative piece for those unfamiliar with the coming controversy which may or may not be impactful in the long term, not a technical one, as the technical ramifications of these issues have not been fully realized, and may not for some months to come. If you are interested in real technical analysis or earnings/financial analysis, you will not find it here.
Call it 'fundamentals of potential public sentiment'. Buy the rumors, sell the headlines. So to speak. We're right before the headlines.
Recently, although this has not been a recent issue and has been ongoing for some time, several videos have been released detailing the situation within the Roblox community. These videos have so far garnered millions of views, and will be linked accordingly. Roblox is a company that, if one is more familiar with the technical chart than the game itself, is a platform on which anyone can develop and publish their own games. As well, there is an in-game currency called Robux which can be accrued by both players and developers of said game via microtransactions and general playtime, so the most popular, regardless of quality, wins- i.e., as any capitalistic system works.
Roblox themselves also offers these microtransactions as limited time items in the form of (essentially) NFTs. Because there is an ingame market and economy, items such as these, as this game is marketed towards children with little judgment (respectfully) in financial matters or spending, skyrocket in value. If one is familiar with the Team Fortress 2 economy (as some of us here are barely old enough to be part of or have transitioned into real finances since then, a decade ago), it is similar, but more exploitative. More on that later.
However, the controversy is not only on this exploitation of children for profit (this happens quite often in mobile and other games, as I am sure many readers are familiar with if they have children of that age), but also on the lack of action and moderation of the company itself. Only recently has a great deal of attention been brought towards these issues. It is a kids game made for kids; I know, and well recall, prior to the IPO, reading many comments about how no one was sure this IPO would do very well, because they did not understand just HOW MASSIVE this company is, and how popular the game is. Nearly everyone I knew under the age of 13, family, friends of family, etc, played it, and many wanted me to play it with them, which I found boring and a tad droll, but of course, one bears that for the sake of the fun for those kids. Most seemed to expect a low IPO, or little confidence. Of course; they would not understand. Now, while any game such as this will somehow find a way to get through the cracks, sexual content, racist content, more extreme violence, etc, were, and still are, common. This is a children's game; whether or not one cares, it should not be allowed, especially uninhibited.
Their lack of genuine responsiveness to media critics, lack of media coverage despite many issues, and a recent deluge of information on the exact absurdities arising from this game, especially in how children end up handling this money, has been exposed more and more clearly in the past few months. A video from a few weeks ago (ref. 2) has 3.3 million views at time of writing; 271k likes and 4.2k downvotes (with the extension installed to reveal them). The previous video which that was a follow-up of was released back in August. That has 1.3 million views, 115k upvotes, 1.9k downvotes. (So the scaled reception ratio, although irrelevant somewhat, is similar). The second video has three times as many views in a much shorter period than the first one. Perhaps the title is to blame; no one likes censorship. Here is a third video, by a more amateur individual, about the monetization in one game and its exploitative methodology, and the ends to which they went. This video is obviously less journalistic than the others, but player sentiment reflects game sentiment. What it indicates to me is that the awareness of this issue is rising greatly, and will be more and more exposed, eventually covered by MSM more. Whether one finds the MSM abhorrent or not, the MSM controls much of public sentiment. This cannot be denied.
Robux have monetary value in a sense- someone can cash out, say, a developer- but the minimum is $1000 in that virtual currency. This is questionable be default to me because of how such things are usually not allowed on games (ingame currency must never have real value). But the main issue is that...
Those ingame items I mentioned, that skyrocket in value, are not just $50 or $100. These are trading like NFTs, like art, where some can go upwards of thousands to tens of thousands. Roblox gets a cut of each and every trade. That means they are making a lot of money, right? That's a good thing for shareholders.
When one is trading, fees are awful. Everyone hates fees like everyone hates taxes, whether they are useful or not in the perpetuity of either the (state) or the (development) of the operant. How does one avoid them? With black market, or side market, submarket, trading. This is prevalent throughout any economic system, virtual or not. Value is assigned not by utility, but by what someone is willing to pay for it. 'Fair value' is a metric that is somewhat arbitrary, as there is no fair value to anything; nothing is fair in life. These grey market systems within the Roblox community bypass these fees and restrictions and allow direct buying and selling of these items between users- and even Robux, the currency, can be traded for fiat, without any intervention by Roblox corp. itself. And, again, this is hundreds of thousands- if not millions- of dollars in a virtual economy. Call it crypto for kids.
These things coming to light, which, while understood by those well invested in the platform itself, is still somewhat unknown to the wider public, especially the parents of these children whom are being exploited.
The gaming elements; the platform; the monetization. I'm sure most don't care about that or its details. All that gets covered are their internal reports and earnings. What will make media coverage is the exploitation, the markets, the amount of digital currency going around in absurd ways- the social impact of the platform on children. The MSM loves and eats that up, because it makes good headlines and good clicks. It is a serious issue that must be addressed, but I sincerely believe that public sentiment- and AWARENESS- of this game will become largely negative and impact both its playerbase, revenue, and more. No other game is so massive that has this rampant issue. Perhaps it cannot be moderated with how big it is.
Will this heavily affect the actual value or trend of the stock in a meaningful way in the coming months, as this becomes public knowledge? Will it even be continued to be covered and looked into?
The bullish case is that everyone will ignore it, or it will not be deemed as serious as other issues, or will be disregarded as just something that cannot be helped, and the RBLX price will continue to be dominated by earnings, internal reports, and technicals. I suppose this is not necessarily a 'bullish' case- but more of a 'these fundamentals are not important in the long term, and may well be a temporary concern that will get covered up in some manner, or forgotten- but with such a massive userbase, I do not believe this can be true. Perhaps if the game was smaller. Not Roblox. The platform itself- a platform which encourages creation by its players and profits from it- is larger than many game development/publishing game companies who make AAA games.
In brief;
I believe (I cannot be certain; nothing is certain) that RBLX will see a startling drop in price as userbase concerns lead to further degradation of the player base, either through regulation, internal regulation, etc. If they fix the problems; less revenue. If players leave; less revenue. If they crack down on black market selling; less revenue, since it had to come from somewhere, and will go back to RBLX, since those players are still players in the game. This virtual economy is self-circular, as you will understand in the expository pieces above.
Thank you
Sofie
Positions disclosure:
I currently have no positions open but I am absolutely going short on the next trading day, so I will state I have short positions since I will soon.
This is a complex issue and I hope you will visit the two videos I linked, listen to them and the genuine complaints they have, and what consequences they may entail for the value, and public sentiment, of stock prices in the near and long term future, particularly long term.
This is a purely informative piece for those unfamiliar with the coming controversy which may or may not be impactful in the long term, not a technical one, as the technical ramifications of these issues have not been fully realized, and may not for some months to come. If you are interested in real technical analysis or earnings/financial analysis, you will not find it here.
Call it 'fundamentals of potential public sentiment'. Buy the rumors, sell the headlines. So to speak. We're right before the headlines.
Recently, although this has not been a recent issue and has been ongoing for some time, several videos have been released detailing the situation within the Roblox community. These videos have so far garnered millions of views, and will be linked accordingly. Roblox is a company that, if one is more familiar with the technical chart than the game itself, is a platform on which anyone can develop and publish their own games. As well, there is an in-game currency called Robux which can be accrued by both players and developers of said game via microtransactions and general playtime, so the most popular, regardless of quality, wins- i.e., as any capitalistic system works.
Roblox themselves also offers these microtransactions as limited time items in the form of (essentially) NFTs. Because there is an ingame market and economy, items such as these, as this game is marketed towards children with little judgment (respectfully) in financial matters or spending, skyrocket in value. If one is familiar with the Team Fortress 2 economy (as some of us here are barely old enough to be part of or have transitioned into real finances since then, a decade ago), it is similar, but more exploitative. More on that later.
However, the controversy is not only on this exploitation of children for profit (this happens quite often in mobile and other games, as I am sure many readers are familiar with if they have children of that age), but also on the lack of action and moderation of the company itself. Only recently has a great deal of attention been brought towards these issues. It is a kids game made for kids; I know, and well recall, prior to the IPO, reading many comments about how no one was sure this IPO would do very well, because they did not understand just HOW MASSIVE this company is, and how popular the game is. Nearly everyone I knew under the age of 13, family, friends of family, etc, played it, and many wanted me to play it with them, which I found boring and a tad droll, but of course, one bears that for the sake of the fun for those kids. Most seemed to expect a low IPO, or little confidence. Of course; they would not understand. Now, while any game such as this will somehow find a way to get through the cracks, sexual content, racist content, more extreme violence, etc, were, and still are, common. This is a children's game; whether or not one cares, it should not be allowed, especially uninhibited.
Their lack of genuine responsiveness to media critics, lack of media coverage despite many issues, and a recent deluge of information on the exact absurdities arising from this game, especially in how children end up handling this money, has been exposed more and more clearly in the past few months. A video from a few weeks ago (ref. 2) has 3.3 million views at time of writing; 271k likes and 4.2k downvotes (with the extension installed to reveal them). The previous video which that was a follow-up of was released back in August. That has 1.3 million views, 115k upvotes, 1.9k downvotes. (So the scaled reception ratio, although irrelevant somewhat, is similar). The second video has three times as many views in a much shorter period than the first one. Perhaps the title is to blame; no one likes censorship. Here is a third video, by a more amateur individual, about the monetization in one game and its exploitative methodology, and the ends to which they went. This video is obviously less journalistic than the others, but player sentiment reflects game sentiment. What it indicates to me is that the awareness of this issue is rising greatly, and will be more and more exposed, eventually covered by MSM more. Whether one finds the MSM abhorrent or not, the MSM controls much of public sentiment. This cannot be denied.
Robux have monetary value in a sense- someone can cash out, say, a developer- but the minimum is $1000 in that virtual currency. This is questionable be default to me because of how such things are usually not allowed on games (ingame currency must never have real value). But the main issue is that...
Those ingame items I mentioned, that skyrocket in value, are not just $50 or $100. These are trading like NFTs, like art, where some can go upwards of thousands to tens of thousands. Roblox gets a cut of each and every trade. That means they are making a lot of money, right? That's a good thing for shareholders.
When one is trading, fees are awful. Everyone hates fees like everyone hates taxes, whether they are useful or not in the perpetuity of either the (state) or the (development) of the operant. How does one avoid them? With black market, or side market, submarket, trading. This is prevalent throughout any economic system, virtual or not. Value is assigned not by utility, but by what someone is willing to pay for it. 'Fair value' is a metric that is somewhat arbitrary, as there is no fair value to anything; nothing is fair in life. These grey market systems within the Roblox community bypass these fees and restrictions and allow direct buying and selling of these items between users- and even Robux, the currency, can be traded for fiat, without any intervention by Roblox corp. itself. And, again, this is hundreds of thousands- if not millions- of dollars in a virtual economy. Call it crypto for kids.
These things coming to light, which, while understood by those well invested in the platform itself, is still somewhat unknown to the wider public, especially the parents of these children whom are being exploited.
The gaming elements; the platform; the monetization. I'm sure most don't care about that or its details. All that gets covered are their internal reports and earnings. What will make media coverage is the exploitation, the markets, the amount of digital currency going around in absurd ways- the social impact of the platform on children. The MSM loves and eats that up, because it makes good headlines and good clicks. It is a serious issue that must be addressed, but I sincerely believe that public sentiment- and AWARENESS- of this game will become largely negative and impact both its playerbase, revenue, and more. No other game is so massive that has this rampant issue. Perhaps it cannot be moderated with how big it is.
Will this heavily affect the actual value or trend of the stock in a meaningful way in the coming months, as this becomes public knowledge? Will it even be continued to be covered and looked into?
The bullish case is that everyone will ignore it, or it will not be deemed as serious as other issues, or will be disregarded as just something that cannot be helped, and the RBLX price will continue to be dominated by earnings, internal reports, and technicals. I suppose this is not necessarily a 'bullish' case- but more of a 'these fundamentals are not important in the long term, and may well be a temporary concern that will get covered up in some manner, or forgotten- but with such a massive userbase, I do not believe this can be true. Perhaps if the game was smaller. Not Roblox. The platform itself- a platform which encourages creation by its players and profits from it- is larger than many game development/publishing game companies who make AAA games.
In brief;
I believe (I cannot be certain; nothing is certain) that RBLX will see a startling drop in price as userbase concerns lead to further degradation of the player base, either through regulation, internal regulation, etc. If they fix the problems; less revenue. If players leave; less revenue. If they crack down on black market selling; less revenue, since it had to come from somewhere, and will go back to RBLX, since those players are still players in the game. This virtual economy is self-circular, as you will understand in the expository pieces above.
Thank you
Sofie
Positions disclosure:
I currently have no positions open but I am absolutely going short on the next trading day, so I will state I have short positions since I will soon.
Note
When I mention MSM I mean mainstream media, not that stock ticker. Oops. Ignore them.Note
Comment: It is also worth noting there was insider selling only 4 days after that second video was posted.sec.gov/Archives/edgar/data/1315098/000131509821000083/xslF345X03/wf-form4_164012589066479.xml
I do not know if these are related and I doubt they are, but it is relevant.
Trade closed: target reached
owned honestlyfor entirely different reasons. did it matter? maybe not.
imo they will probably coast back up at this point.
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