Recommendation of the investment company Hindenburg Research open short on Block shares led to a drop in their value by 22.3%. Analysts attributed the decision to a “wild discrepancy” in operating numbers.
Experts referred to the overestimation of the number of CashApp users while underestimating the cost of attracting them. In particular, the first indicator is 40-75% formed from fake, fraud-related or tied to the same individual accounts.
Hindenburg Research indicated that the company allowed attackers to easily create multiple accounts and then quickly monetize the stolen funds.
Even if users were convicted of fraud or other prohibited activities, Block blacklisted the account, without a corresponding block. The phenomenon turned out to be so massive that “rappers boasted about it in songs,” experts said.
The analysis is based on dozens of interviews with former employees, partners and industry experts, an extensive review of regulations and litigation.
“Following a two-year study, we found that [… ] The “magic” of Block’s business was not disruptive innovation, but rather the company’s willingness to encourage consumer and government fraud, avoid regulation, issue extortionate loans and fees for revolutionary technology, and mislead investors with inflated numbers.” the report says.
Analysts concluded by noting that Dorsey and senior executives sold more than $1 billion worth of shares during a period of rapid growth in capitalization during the pandemic. They guaranteed that they would be all right, regardless of the outcome for the rest of the shareholders.
At the end of the fourth quarter, Block revenue (formerly Square) from selling bitcoin through the Cash App made up $1.83 billion. Operations generated a gross profit of $35 million for the payment company. Its share was 2% of the company’s total.
Recall that on March 15, three exchange-traded funds managed by Ark Invest bought more Block shares for a total amount of more than $9 million. Taking into account recent operations, the amount of purchases of securities of the company of the ex-head of Twitter exceeded $30 million – $13.7 million on March 14 and $6.4 million in the afternoon previously.
Earlier, Block announced its work on the creation of a “bitcoin mining developer kit”, before that it announced the launch of a division for the development of the ecosystem of the Lightning Network micropayment network. The project received a capacious name – with =.
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