Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Hindenburg takes aim at Jack Dorsey's payments firm Block, shares plunge

Hindenburg takes aim at Jack Dorsey's payments firm Block, shares plunge

Hindenburg Research on Thursday disclosed short positions in Block Inc (SQ.N) and alleged that the payments firm led by Twitter co-founder Jack Dorsey overstated its user numbers and understated its customer acquisition costs.

Block vowed to fight back, saying it would explore legal action against the short seller for its "factually inaccurate and misleading report" that was "designed to deceive and confuse investors".

"Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price," the payments firm said, adding that it would work with the U.S. Securities and Exchange Commission.

Block's shares were last down 15% at $61.67, paring some losses after a 22% plunge earlier.

Hindenburg, which was behind a market rout of over $100 billion in India's Adani Group, said in its report that former Block employees estimated that 40% to 75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

The move is seen as a challenge to Dorsey, who co-founded Block in 2009 in his San Francisco apartment with the goal to shake up the credit card industry, and is the company's largest shareholder with a stake of around 8%.

The NYU dropout was just until two years ago splitting his time between the payments firm and Twitter, his other venture that went private in 2022 in a $44 billion buyout by Elon Musk that Dorsey supported.

"Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping," Hindenburg said in a note published on its website.

The report comes at a time when the outlook for the payments industry has been clouded by worries over the strength of consumer spending in the face of elevated levels of inflation and expectations of an economic downturn.

Those concerns triggered a more than 60% slump in Block's shares last year.

Hindenburg said that Block "obfuscates" how many individuals are on the Cash App platform by reporting "misleading transacting active metrics filled with fake and duplicate accounts".

Reuters could not verify the claims raised in the report.

Cash App allows users to transfer money through a mobile application and is touted by the company as an alternative to traditional banking services.

The app had 51 million monthly transacting actives, a 16% year-over-year increase during December 2022, Block said in a fourth-quarter earnings letter.

The short seller added that co-founders Dorsey and James McKelvey collectively sold over $1 billion of stock during the pandemic as the company's share price soared.

Other executives including finance chief Amrita Ahuja and the lead manager for Cash App Brian Grassadonia also dumped millions of dollars in stock, the report added.

"What I am really concerned about is the Cash App, accusations of fraud, multiple accounts, opening accounts and fake names. And it doesn't seem like that would be something that they would allow," said Christopher Brendler, senior analyst at D.A. Davidson & Co.

"(There is) some evidence in the report that this is happening. So, you know, I think that's the most damaging part of the report," he added.

Based on the session's 20% price move, as of 9:55 a.m. ET, short sellers have made over $400 million in paper profit, according to data from financial analytics firm Ortex. Short interest was 27.96 million shares, or 5.21% of free float.

The company's ticker was the top trending on retail investor-focused forum StockTwits.

Block has also taken a hit from the upheaval in the cryptocurrency industry that forms a large chunk of its revenue base.

The company offers point-of-sales systems and an app that allows people to trade cryptocurrency.

Last month, Block said it was "meaningfully slowing" the pace of hiring this year to control costs.

Founded in 2017 by Nathan Anderson, Hindenburg is a forensic financial research firm that analyses equity, credit and derivatives.

Hindenburg invests its own capital and takes short positions against companies. After finding potential wrongdoings, the company usually publishes a report explaining the case and bets against the target company, hoping to make a profit.

Short sellers typically sell borrowed securities and aim to buy these back at a lower price.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
JD Vance Warns Europe Faces “Civilizational Suicide” Over Open Borders and Speech Limits
Germany Enters Fiscal Crisis as Cabinet Approves €174 Billion in New Debt
Trump Administration Finalizes Broad Tariff Increases on Global Trade Partners
JD.com Launches €2.2 Billion Bid for German Electronics Retailer Ceconomy
Azerbaijan Proceeds with Plan to Legalise Casinos on Artificial Islands
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
House Republicans Move to Defund OECD Over Global Tax Dispute
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
Intel Reports Revenue Beats but Sees 81% Rise in Losses
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
CEO Resigns Amid Controversy Over Relationship with HR Executive
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
Tulsi Gabbard Unveils Evidence Alleging Political Manipulation of Intelligence During Trump Administration
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Trump Announces Coca-Cola to Shift to Cane Sugar in U.S. Production
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Air India Pilot’s Mental Health Records Under Scrutiny
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
Moonshot AI Unveils Kimi K2: A New Open-Source AI Model
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Bitcoin Reaches New Milestone of $116,000
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
×