Please ensure Javascript is enabled for purposes of website accessibility

Why Roblox Stock Dropped Again on Friday

By Rich Smith – Jan 7, 2022 at 11:33AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Roblox seems to be having a little trouble in big China.

What happened

After Roblox (RBLX -1.67%) stock bounced back briefly yesterday from its sell-off earlier in the week, Friday arrived with more bad news for its investors -- and that news arrived already a month stale. As Reuters just reported, the video gaming platform's Chinese app "was shut down on Dec. 8."

Roblox stock is down 4.4% as of 10:20 a.m. ET today.

Map of China under a magnifying glass.

Image source: Getty Images.

So what

Yesterday's news on Roblox was of the good variety, though, with broker BTIG publishing a note estimating that the company grew its user registrations by 30% year over year in December, according to The Fly. BTIG called this  "impressive" growth in a period when fewer kids were homebound with little else to do but play video games all day. BTIG also observed that sales of Robux digital currency -- a proxy for future revenue growth at Roblox -- "looks strong" for December.

This good news, however, was undermined this morning by Reuters' revelation that nearly a month ago Roblox removed its LuoBuLesi app, created in partnership with Tencent Holdings and used by kids to play Roblox games, from app stores in China -- and hasn't restored the app since.  

Now what

Responding to the story, Roblox told Reuters that removing the LuoBuLesi app was one of "a number of important transitory actions" the company took in preparation for revealing a new version of the app. But it does seem strange that the company would disable access to one app without having its replacement ready immediately.

The fact that Roblox has now gone nearly one full month without a Chinese app allowing access to its games suggests there's something more troubling afoot here -- perhaps more Chinese government meddling with tech companies -- but to be honest, we just can't be sure what yet.

In the absence of a clear answer, it's no wonder investors are nervous.

Rich Smith owns Roblox Corporation. The Motley Fool owns and recommends Roblox Corporation and Tencent Holdings. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.