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Updated March 23rd, 2023 at 21:50 IST

Hindenburg shorts Jack Dorsey's payments firm Block; company shares plunge 12 per cent

Hindenburg Research on Thursday released a new report on Block Inc, the payments company founded by former Twitter CEO and founder Jack Dorsey.

Reported by: Harsh Vardhan
Hindenburg
Hindenburg claims in its new report that the company lied about its metrics and showed false numbers to mislead investors; Image: | Image:self
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After delivering a multi-billion dollar blow to Adani Group, US-based Hindenburg Research on Thursday released a new report on Block Inc, the payments company founded by former Twitter CEO and founder Jack Dorsey. Hindenburg is a short-selling company headquartered in New York which makes a profit when big conglomerates make huge losses. The Adani Group faced a major crisis after Hindenburg alleged that the Gautam Adani-led conglomerate is engaged in a "brazen stock manipulation and accounting fraud scheme." The grave allegations by the short-seller cost the Adani Group billions and forced it to call off its Rs 20,000 crore (over $2.5 billion) follow-on public offer (FPO).

Hindenburg now short-sells Jack Dorsey's firm

With its eyes now set on Block Inc, Hindenburg claims in its new report that the company lied about its metrics and showed false numbers to mislead investors. The short-selling firm also claimed that its two-year-long investigation confirmed Block Inc taking "advantage of the demographics it claims to be helping." 

Here are some of the major allegations levelled in the Hindenburg report. 

1. "Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics," the report reads. 

2. "Block Inc., formerly known as Square Inc., is a $44 billion market cap company that claims to have developed a “frictionless” and “magical” financial technology with a mission to empower the “unbanked” and the “underbanked.”

3. "Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual."

Notably, Block Inc's shares continue to plunge and have dipped over 12% (trading around $64) at the New York stock exchange just a couple of hours after the report was released. 

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Published March 23rd, 2023 at 20:28 IST

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