Roblox Corporation's stock plummeted 5.07% during intraday trading on Friday, following the announcement of a significant lawsuit filed against the company.

The sharp decline comes after Los Angeles County sued Roblox, alleging the online gaming platform failed to protect children from predatory behavior. The lawsuit claims Roblox created an unsafe environment where children were exposed to sexually explicit content, exploitation, and grooming, accusing the company of prioritizing corporate profit over child safety.

Filed in Los Angeles Superior Court, the legal action seeks injunctive relief and civil penalties that could amount to thousands of dollars per day for each alleged violation. While Roblox has stated it disputes the claims and will defend itself vigorously, investors reacted negatively to the potential legal and reputational risks associated with the lawsuit.