Short-selling calls on Block shares by Jack Dorsey backers push stock down about 22%

Hindenburg Research открыть шорт on Block shares led to a 22.3% drop in their price. Analysts attributed the move to a ‘wild mismatch’ in operating metrics.

Experts cited an overstatement of Cash App users while costs of acquiring them were understated. In particular, the first metric was inflated by 40-75%, formed from fake accounts linked to fraud or tied to the same individual.

In their report, Hindenburg said the company allowed attackers to easily create multiple accounts and quickly monetise stolen funds.

Even if users were suspected of fraud or other illicit activity, Block would blacklist accounts without proper blocking. The phenomenon was so widespread that ‘rappers bragged about it in songs,’ the experts noted.

The analysis is based on dozens of interviews with former employees, partners and industry experts, a broad review of regulatory documents and court proceedings.

«По итогам двухлетнего исследования мы выяснили, что [… ] „волшебством” бизнеса Block были не разрушительные инновации, а скорее готовность компании способствовать мошенничеству с потребителями и правительством, избегать регулирования, выдавать грабительские кредиты и сборы за революционную технологию и вводить инвесторов в заблуждение завышенными показателями», — говорится в отчете.

In conclusion, analysts note that Dorsey and top executives sold shares worth more than $1 billion during the period of rapid capitalization growth during the pandemic. They assured that they would be fine, regardless of the outcome for other shareholders.

Block’s fourth-quarter revenue from selling bitcoin via the Cash App составил $1.83 billion. The operations generated gross profit of $35 million for the payments company. Its share accounted for 2% of the company’s total.

As of March 15, three Ark Invest-managed exchange-traded funds added to Block stock worth more than $9 million in total. Taking into account the latest operations, the ex-Twitter chief’s stock purchases exceeded $30 million — $13.7 million on March 14 and $6.4 million the day earlier.

Earlier Block said it was working on a ‘developer set for Bitcoin mining,’ previously — announced the launch of a unit to develop the Lightning Network ecosystem. The project was given the concise name — с=.