‘We are short,’ declares Hindenburg on Block’s response over inflated Cash App user counts
Hindenburg says Jack Dorsey's firm's response to its allegations confirmed 'it had reported inflated user counts on its Cash App to investors for years'
- Mar 31, 2023,
- Updated Apr 1, 2023 11:19 AM IST
"We are short shares of Block Inc," declared US short seller Hindenburg Research on Friday as the Jack Dorsey-led firm's response to its allegations confirmed "it had reported inflated user counts on its Cash App to investors for years".
The payments firm, led by Twitter co-founder, said on Thursday that 44 million of its more than 51 million monthly active customers on Cash App were verified through its identity program as of Dec. 31.
"Block's newly reported internal estimates also show that its previously reported 51 million monthly transacting actives as of December 2022 represented a 16%-31% inflation of its actual estimated internal user counts," Hindenburg said in a note published on its website.
The disclosure follows Hindenburg Research's report last week that said former Block employees estimated 40% to 75% of accounts they reviewed were fake, involved in fraud or were additional accounts tied to a single individual.
After taking a short position in Block, Hindenburg alleged in the report that the payments firm overstated its Cash App user numbers and understated its customer acquisition costs.
Short sellers typically sell borrowed securities and aim to buy these back at a lower price.
"Block completely ignored our questions around interchange revenue, including how it avoid regulation meant to cap fees to merchants," said Hindenburg on Friday.
Dorsey co-founded Block in 2009 in his San Francisco apartment with the goal to shake up the credit card industry.
"Block failed to respond and failed to provide any clarification on its promotion of illegal activity on its platform," added the US short seller whose allegations against Adani Group, earlier in January, led to the conglomerate's market value fall by $125 billion.
"We are short shares of Block Inc," declared US short seller Hindenburg Research on Friday as the Jack Dorsey-led firm's response to its allegations confirmed "it had reported inflated user counts on its Cash App to investors for years".
The payments firm, led by Twitter co-founder, said on Thursday that 44 million of its more than 51 million monthly active customers on Cash App were verified through its identity program as of Dec. 31.
"Block's newly reported internal estimates also show that its previously reported 51 million monthly transacting actives as of December 2022 represented a 16%-31% inflation of its actual estimated internal user counts," Hindenburg said in a note published on its website.
The disclosure follows Hindenburg Research's report last week that said former Block employees estimated 40% to 75% of accounts they reviewed were fake, involved in fraud or were additional accounts tied to a single individual.
After taking a short position in Block, Hindenburg alleged in the report that the payments firm overstated its Cash App user numbers and understated its customer acquisition costs.
Short sellers typically sell borrowed securities and aim to buy these back at a lower price.
"Block completely ignored our questions around interchange revenue, including how it avoid regulation meant to cap fees to merchants," said Hindenburg on Friday.
Dorsey co-founded Block in 2009 in his San Francisco apartment with the goal to shake up the credit card industry.
"Block failed to respond and failed to provide any clarification on its promotion of illegal activity on its platform," added the US short seller whose allegations against Adani Group, earlier in January, led to the conglomerate's market value fall by $125 billion.