After Adani Group, Hindenburg shorts ex-Twitter CEO Jack Dorsey’s payments app Block

Hindenburg research- the American research firm- which made headlines for its report accusing the Adani Group caused a widespread stock market sell-off and price drop, has now put out a report on Block Inc, the company of former Twitter chief executive officer (CEO) Jack Dorsey. Hindenburg accused Block of facilitating fraud. On its website, Hindenburg said that Block systematically took 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 a revolutionary technology, and mislead investors with inflated metrics.”

“Most analysts are excited about the post-pandemic surge of Block’s Cash App platform, with expectations that its 51 million monthly transacting active users and low customer acquisition costs will drive high margin growth and serve as a future platform to offer new products,” the Hindenburg report said. 

“Our research indicates, however, that 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,” the report added. ‘

“We also think Jack Dorsey has built an empire—and amassed a $5 billion fortune—professing to care deeply about demographics he is taking advantage of. Having sold shares near the top, he’s ensured he’ll be fine regardless of the outcome for everyone else,” the research firm tweeted separately. 

Shares of Block plunged after the American research firm’s revelations. 

Earlier on Thursday, Hindenburg had tweeted, “New report soon—another big one,” and did not give any other details. 

The research firm’s report on January 24 accused the Adani Group of fraud and tax manipulation. The report also said that the Adani Group had unsustainable debt. The conglomerate denied the allegations, saying it complied with all laws and has made necessary disclosures over time. 

In India, the opposition Congress accused the Bharatiya Janata Party (BJP)-led central government of favouring the Adani Group. 

Adani Group’s stock lost more than 145$ billion in market value at one point after the report was published. However, since those deep losses, shares of Indian business firms have recovered somewhat. Although they are still in red compared to trades before the US short seller’s report two months back. 

Hindenburg’s report on Block comes when the United States is in the midst of a banking crisis. The recent failures of American banks and the 167-year-old Swiss bank Credit Suisse has weighed heavily on financial markets, wiping out billions of dollars. 

Earlier, Twitter users had criticised Hindenburg for being biased after the collapse of the Silicon Valley Bank, pointing out that the research firm had been silent about the failure of major US banks. 

(With inputs from WION Business Team)

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