Bad rap
Block, the fintech company responsible for payment platforms Square and Cash App, has become the latest target of Hindenburg Research, just 2 months after the infamous short-seller went for the Adani Group.
Hindenburg accuses Block — which is still run by Twitter founder Jack Dorsey — of obfuscating the user numbers of its service Cash App. The report claims that somewhere between 40% and 75% of Cash App accounts reviewed “were fake, involved in fraud, or were additional accounts tied to a single individual”. The report also accused Cash App of facilitating crime, owing to how easy it is to get an account, even going so far as to put together a compilation video of rappers who claim to use Cash App for various nefarious deeds.
On a frantic day of trading yesterday, some $8bn+ of Block stock changed hands, with the share price down 15% despite the company's protestations that the report was “factually inaccurate” and “designed solely to allow short sellers to profit from a declined stock price”.
Appetite for a fight
This latest report puts Hindenburg in the firing line for another potential legal battle, as the firm continues to argue its case against Adani Group — the Indian conglomerate that it accused of fraud in January. Indeed, according to Bloomberg, Hindenburg has now bet against some 30 companies since 2020, with its standard procedure — shorting the stock and making a lot of noise about it — proving effective. Bloomberg estimates that six months after a report is published, a typical Hindenburg target is down ~26%.
