Roblox Slumps on Hindenburg Bet, States Sue TikTok | Bloomberg Technology

Roblox Stock Tumbles After Hindenburg Report

• Shares of Roblox are tumbling after short seller Hindenburg Research bet against the gaming platform, citing inflated key metrics and a lack of safety for children on the platform (58s).
• Hindenburg Research accuses Roblox of inflating metrics such as time spent and engagement to appease investors, and also highlights long-discussed issues with child safety on the platform (1m16s).
• Roblox rejects the claims made by Hindenburg Research, stating that the financial claims are misleading and that the authors have an agenda as short-sellers (2m16s).
• Roblox's response also points out that the company's business model is being pushed back against by Hindenburg Research, which claims that the company is misleading investors by relying on a daily activity user number and a people number that are the same (2m32s).
• The company's stock is down 70% from its all-time high in 2021 and has been on a string of losing days, with a 13% or 14% drop from the September high (3m36s).
• Trading volume for Roblox is nine times the normal level, with over 17 million shares changing hands in the first hour and a half of the day (4m11s).
• Roblox has been trying to address safety concerns on the platform, but this is not the only bearish voice, with Evan Dorsey also expressing concerns about the company's user metrics (4m38s).
• The concern about user metrics is new, but it is part of a mounting concern about the company's business model and safety record (4m54s).
• Hindenburg Research has targeted Roblox, publishing reports on the company's child safety and potential prioritization of profits over people, including allegations of inflating numbers, with a recent report incorporating some of the company's metrics from last week (5m21s).
• The reports primarily focus on child safety, profits, and the lack of safeguards, with Roblox being invited to respond to the allegations (5m35s).

TikTok Lawsuits and Child Safety Concerns

• TikTok has been sued by California, New York, and a dozen other states for allegedly deceiving users about its safety for children and using harmful and addictive features to maximize profits (5m54s).
• The states claim that TikTok has baked addictive features into its algorithm, including endless scrolling, beauty features, and comments, causing a public health crisis among young people (6m37s).
• The lawsuit is part of a broader effort to address the issue, with the attorneys general taking issue with TikTok's safety precautions, saying they are not real (7m41s).
• In a separate case, the Federal Trade Commission sued TikTok in August for failing to abide by the terms of the 2019 settlement over child privacy, alleging that the company's measures have not been enough (7m52s).
• The states are also alleging that children's private data was being exploited without parental consent or notice, a fundamental violation of the relationship with children under the age of 13 (8m13s).

Other Company News

• Samsung has issued a rare apology to investors after posting disappointing results, admitting it is grappling with a potential crisis after losing its way, and has begun laying off workers as part of a plan to reduce its global headcount (8m35s).
• Rivian is facing a snag in its supply chain, throwing a wrench into its 2024 production targets, a story that will be covered later in the hour (8m51s).
• NVIDIA's shares are off to a strong session, touching a 4% gain, which would make the stock trade at its highest level since mid-July, as the company holds its AI summit in D.C. (9m4s).
• Amazon is facing an antitrust lawsuit filed by the U.S. Federal Trade Commission, alleging that its online marketplace practices harm competition. Amazon has requested the court to dismiss the complaint, but the judge has allowed the FTC's complaint to proceed, dismissing only a few state law claims. (9m47s)
• In a separate antitrust case in California involving Epic Games, a judge has imposed an injunction on Google, preventing it from paying developers or manufacturers to make its Play Store the default on devices. This injunction aims to foster competition by allowing other app stores on Android devices. Google plans to appeal the decision. (11m28s)
• The U.S. Justice Department is expected to propose remedies for Google's illegal monopoly in online search and search ads, as ruled by a judge earlier this year. One potential remedy could be the breakup of Google, marking a significant move by the federal government. (12m51s)

Meta's New AI Tools for Advertisers

• Meta is introducing new AI tools to help advertisers create and edit video ads more easily on Facebook and Instagram. These tools, available broadly next year, will use generative AI to convert static images into video ads and allow automatic editing and resizing of video ads. (13m38s)
• Meta has announced a new feature called Metagen Video, which allows users to create videos using generative AI, aiming to democratize video creation and attract more ad dollars from small and medium-sized businesses (SMBs) (14m27s).
• The feature is expected to propel Meta's growth forward, as the fastest-growing ad platforms are centered around short-form video, and creative is the number one barrier for marketers (14m35s).
• Meta is already driving two-thirds of social traffic, and its commerce impressions are a winning formula, with a 10% growth in brand traffic between 2023 and 2024 (15m7s).
• However, TikTok has seen a 190% growth in brand traffic during the same period, and Meta needs to continue making investments in its platform to maintain its lead (15m28s).
• The new feature can turn a static image into a video ad, which is a significant development in AI technology, and Meta is getting credit for its real-world progress in this area (16m0s).
• Advertisers can spend up to 10% of their overall marketing investments on creative, and the new feature can change marketing and advertising as we know it, potentially reducing the need for marketers and creating a rippling effect in terms of headcount (16m29s).
• However, Fortune 1000 brands have concerns about copyright violation and data privacy when it comes to AI and creative, and Meta needs to address these concerns (17m5s).

Amazon Prime Day and Consumer Spending

• Amazon Prime Day is an important event, not just in the US but globally, as it is a day to move excess supply and bring value to consumers, and it will show how willing consumers are to spend during this year's holiday season (17m54s).
• The event is particularly important this year, as consumers are fighting back against price hikes with their wallets, and basket sizes have declined by 20% (18m12s).
• The Federal Reserve's potential interest rate drop in November and December brings optimism to consumers (18m49s).
• Temu, an Amazon rival, is selling Alexa-activated remote controls compatible with Amazon's Fire TV Stick for as little as $4, significantly cheaper than similar generic versions on Amazon.com and the official Fire TV replacement (19m9s).

Chinese Hacking Incident and U.S. Infrastructure

• The U.S. is investigating a potential Chinese hacking incident involving three American telecom companies, with investigators suggesting a hacker may have accessed court-authorized wiretapping information (19m49s).
• The malicious actor behind the hacking incident is believed to be part of a PRC state-sponsored cyber campaign, specifically the group known as "Saul Typhoon" (20m23s).
• The hacking incident is thought to be part of a broader campaign targeting infrastructure, including telecoms and water infrastructure, with the goal of pre-positioning China to disrupt or destroy U.S. infrastructure in the event of a conflict over Taiwan (21m11s).
• Former Chief of Staff Kiersten Todt emphasizes the need for companies to elevate their security and safety measures, assuming that China is already on their networks, and to test continuity plans and different scenarios to ensure they are safe and secure (21m40s).
• Todt also stresses that this should not be news to any company or board member with cyber board governance, and that all critical infrastructure companies should be taking proactive measures to prepare for potential threats (21m57s).

European Tech Investment Banking and IPO Market

• The discussion will continue with J.P. Morgan's Head of European Tech Investment Banking, who will share his biggest bets in the region and discuss the biggest names out of Europe (22m24s).
• NVIDIA leads the charge in the tech industry, with a 30% rally in the last five days, and news about its energy efficiency coming from its AI event (23m20s).
• Microsoft is up a percentage point, despite more bearish calls, and Oppenheimer has estimated that Microsoft will push more than a percentage point (23m44s).
• Supermicro is down almost 6% after rallying more than 15% yesterday, due to concerns about the DOJ investigating the company's deployment of over 100,000 graphics processing units (23m56s).
• China's market reopened with anticipation of stimulus, but investors were disappointed as China held a press conference stating they are confident in reaching their growth goals without issuing more stimulus, leading to a 6% drop in the benchmark CSI and a 6.5% drop in the Golden Dragon Index (25m17s).
• The Hang Seng Index experienced its worst performance since 2008, with the consensus being that investors are disappointed and the commitment to fiscal stimulus looks weaker than expected, showing the fragility of optimism in China (25m37s).
• JP Morgan Chairman and CEO Jamie Dimon expressed concerns about the U.S. IPO market, stating it may stay muted as markets may come down, and companies may find other sources, such as non-public sources, and that it has become harder to go public in the United States (26m16s).
• Matt Gehl discussed the trend of large fintechs, such as Stripe and Revolute, opting for secondary market deals instead of going public, citing it as a signal of strength in the market and allowing companies to give liquidity to earlier investors and remove time pressure to go public (27m5s).
• Gehl believes that these companies have a strong intent to go public in the near to medium term but are using secondary deals to control the timing and avoid being forced into a window, especially given the macro and geopolitical issues in the next six to 12 months (27m29s).
• The U.S. has become the default for businesses with a global footprint due to its deep and rich IPO market, but European businesses with a global footprint may also consider listing in Europe, keeping their options open (28m1s).
• European tech companies have grown significantly, with investments in new areas such as deep tech, chip companies, and industrial software companies, which is expected to have a positive impact on the overall market in the next two to four years (29m21s).
• London's equity capital market could be a great place for tech IPOs, but it depends on the company's global footprint and investor base, with the US being a more attractive option for British-based companies with a global presence (30m4s).
• For companies with a more European or UK-centric focus, a sizable offering and liquidity are necessary for a successful IPO in the UK (30m26s).
• ARM's IPO in the US has been a huge success, and while a secondary listing in the UK is possible, it's not imminent, as the company is currently focusing on liquidity and a single market (31m0s).
• ARM has not been an inquisitive company in terms of M&A, but as the ecosystem evolves, they may consider acquisitions, although they need to ensure they don't create a situation where they compete with their customers (31m28s).
• JP Morgan is looking to serve early-stage technology companies with VC funding, having recently hired over 50 bankers focused on this area, and sees an opportunity to build relationships with companies from an early stage (32m17s).
• The void left by Silicon Valley Bank has created an open market with many players trying to fill it, and HSBC's purchase is one example of this (32m7s).
• The technology story in Europe for the next year is expected to be similar to what is seen in the US markets, with investors looking beyond the large-cap names and towards smaller cap and higher growth names (33m18s).
• There may be a somewhat muted IPO market in the first six months of the year, but activity is ramping up for companies preparing to go public in the US and Europe, with 2025 expected to be better than 2024 and 2023 for IPOs (33m38s).

Maven Clinic's Series F Funding and Healthcare Transformation

• Maven Clinic, a virtual clinic for women and families, has raised $125 million in a Series F funding round, bringing the valuation to $1.7 billion, with plans to use the new funds to transform outcomes and take a more data-driven approach to healthcare (35m38s).
• The company's CEO, Kate Ryder, says that the funding will be used to build on the confidence of care platform they have built over the last decade, and to go deeper in transforming outcomes using data and distribution power (35m59s).
• The company's care engine, which powers care coaching and telehealth, is one of the areas they are most excited about, and they plan to use the funding to harness the underlying technology to make healthcare feel more connected and less fragmented (36m46s).
• Maven Clinic fits within America's insurance system by partnering with insurers and innovating from within the industry, making it easy for parents to decide if they can afford the service (37m58s).
• Maven is a company that provides virtual care and helps members understand their benefits, with a carveout model called Maven Manage Benefit that contracts with different clinics to provide transparent experiences for members managing their fertility journeys (38m31s).
• Maven's business model is designed to support women and families at the center of their care model, and the company wants to remain independent while also considering going public in the future (39m35s).

AI Initiatives and Company Strategies

• Radical Ventures is offering a $250,000 incentive in computer credits to AI researchers who want to start their own company, with a total of $4 million to be given away through the program (40m11s).
• Etsy is using AI to grow its business and improve the consumer experience, with a focus on personalizing searches and predicting delivery times more precisely (41m35s).
• Etsy's mission is to keep commerce human, and the company sees AI as a partnership between humans and technology that can help achieve this goal (41m35s).
• Etsy has introduced a new feature called Gift Mode, which allows users to purchase gifts for others and provides a more viral way to introduce people to the platform (42m28s).
• Marketing is a key part of Etsy's growth strategy, with the company taking a fast approach to marketing this year after a successful Super Bowl ad (42m47s).
• Etsy CFO Rachel Glaser discussed the company's spending strategy, stating that a big bet on a Super Bowl ad was never intended to be an ROI-positive investment, but rather a launch of a new initiative and product (43m1s).
• Rivian shares plummeted last week after the company slashed production due to a miscommunication with a supplier that left them without access to copper windings, a core component in their electric motors (43m32s).
• The U.K. is opening a Regulatory Innovation Office to speed up approvals of AI, drone, and other new technologies, aiming to reduce the time it takes for entrepreneurs to get their inventions to market (43m42s).
• Google will join Microsoft and Amazon in using nuclear fuel to power the AI boom (44m4s).