Hindenburg II: After targeting the Adanis, the US shorter bleeds Dorsey’s payment firm “Block”
Virendra Pandit
New Delhi: Exactly two months after targeting India’s Adani Group, the US-based Hindenburg Research shorted Twitter’s former co-founder Jack Dorsey-led payments firm Block, whose shares plunged over 20 percent on Thursday, and his wealth tumbled by over USD 526 million on a single day.
After the January 24 Hindenburg claims, the share price of Adani companies nosedived and investors lost over USD 100 billion worth of money in the next five weeks.
On Wednesday, Hindenburg announced its next move.
On Thursday, Hindenburg alleged that Block Inc. overstated its user numbers and understated its customer acquisition costs, the media reported.
With Hindenburg Research’s disclosures of short positions on Thursday, the share price of Block slid 20 percent to USD 57.85 in pre-market trading. If losses hold through the session, shares could record their steepest percentage fall since March 2020.
“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” Hindenburg said on its website.
The US-based short-seller, behind a market rout of over USD 100 billion in India’s Adani Group, said that former Block employees estimated that 40-75 percent of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
Hindenburg claimed that Block “obfuscates” how many individuals are on the Cash App platform by reporting misleading “transacting active” metrics filled with fake and duplicate accounts.
It said Block’s co-founders Jack Dorsey and James McKelvey sold over USD 1 billion of stock during the pandemic as the company’s share price soared.
The Hindenburg report added that other executives, including Block’s CFO Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, also dumped millions of dollars in stock.
Quoting Ortex data, the media reported that about 5.2 percent of Block’s free float shares were in a short position as of March 22. The company’s ticker was third-most trending on the retail investor-focused forum StockTwits.
In February, Block said it is “meaningfully slowing” the pace of hiring this year to control costs.
Founded in 2017 by Nathan Anderson, Hindenburg Research 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 repurchase these at a lower price.
