Stung by Hindenburg, here's what Jack Dorsey's Block plans to do
Hidenburg Research, who came in limelight in India after accusing Adani Group of financial fraud, on Thursday released a fresh report charging Jack Dorsey's Block with "widely overstating" the number of users on its platform. Here, we show an update on what has transpired till now in the case.
The Hindeburg Research report on ex-Twitter CEO Jack Dorsey's mobile payments firm Block has begun to have an impact on the company's fortunes. The company's shares fell significantly in the Australian exchange on Friday, while the shares in the US market fell by as much as 22% on Thursday. Block has since refuted the claim and has said to exploring legal options.
The US short-seller, who made headlines in India following allegations of financial malpractice on Adani Group, announced a new report on Thursday accusing Jack Dorsey's Block of "widely overstating" its user base. Here, we present an update on what has happened till now in the case.
All we need to know about Hidenburg's new salvo
1. Hidenburg report claim: Hindenburg Research claimed that during the pandemic, Block's popular Cash App was likely enabling scammers taking advantage of government-stimulus programmes.
“Block ignored both internal and external warnings that multiple individuals using the same bank account number to receive government funds was a brazen red flag of fraud. Multiple key lapses in Cash App’s compliance processes facilitated billions in government payment fraud,” Hindenburg report said.
2. Block's response: The Dorsey-led company stated in its response that it plans to work with the Securities and Exchange Commission "and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about Cash App business."
The company statement read, “We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors. We are a highly regulated public company with regular disclosures, and are confident in our products, reporting, compliance programs and controls.”
3. Personal wealth at stake: Jack Dorsey's personal stake in Block is worth $3 billion as his holds around of 8% of the shares, which makes the company a significant part of his wealth. His wealth dropped by $526 million right after the report was released, which was the biggest decline in a single day since May. His present net worth is $4.4 billion, according to the Bloomberg Billionaires Index, following an 11% decline.
4. Block shares' decline continues: Australia-listed shares of Block Inc, where it has secondary listing, slumped as much as 20% on Friday to hit their lowest since November 2022.
5. Rout in US market: Earlier on Thursday, shares of Block on New York Stock Exchange declined to as low as 22%, registering the company’s biggest intraday decline in three years.
(Inputs from agencies)