Hindenburg Next Victim: Silicon Valley Darling Cracks 15% on Bombshell Report

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Hindenburg Next Victim: Silicon Valley Darling Cracks 15% on Bombshell Report
Credit: © Reuters.

By Malvika Gurung

Investing.com -- After dropping a scathing report on Adani Group, the US investment research firm Hindenburg Research LLC has now released another bombshell report on the American payment and mobile banking services provider Block Inc (NYSE: SQ ).

Block is a Silicon Valley darling, founded by entrepreneur and co-founder of Twitter Jack Dorsey, which has a secondary listing in Australia. Its shares slumped 14.8% to $61.88 apiece in the previous session. 

The US short-seller has claimed in a 2-year long investigation report that the $44 billion market cap payment company Block has inflated user metrics and conducted fraudulent activities, which has helped block insiders cash out over $1 billion in insider stock sales.

Hindenburg’s investigation concludes that Block has ‘systematically taken advantage of the demographics it claims to be helping’.

It states, “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.”

The short-seller has released its extensive report on Block after interviewing dozens of the San Francisco-headquartered company’s former employees, partners, and industry experts, in extension to reviewing its regulatory and litigation records.

Block has been alleged to ‘wildly’ overstating its genuine user counts and has understated the 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 damning report added.

Hindenburg has called out Block’s work-style as a ‘Wild West’ approach.

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