Block shares down as Hindenburg takes aim at the crypto company
- Hindenburg Research reveals a short position in Block Inc.
- Block says it’s exploring legal action against the short seller.
- Wall Street has a consensus overweight rating on Block shares.
Shares of Block Inc are trading 15% down on Thursday after Hindenburg Research revealed to have taken a short position in the financial technology company.
Hindenburg’s reasons for short selling Block
Hindenburg says the multinational conglomerate has an enormous number of fake or duplicate accounts at its celebrated Cash App platform.
More alarmingly, its research that spanned over two years alleges many of those accounts to be involved in criminal activities, including sex trafficking. The report reads:
Block has misled investors on key metrics and embraced predatory offerings and compliance worst-practices to fuel growth and profit from facilitation of fraud against consumers and government.
In February, Block said its monthly active users went up 16% year-on-year to 51 million in December. Its shares are slightly in the red for the year following the price action today.
Block to take legal action against Hindenburg
Hindenburg also took and issue with the fact that top executives, including CEO Jack Dorsey has sold more than $1.0 billion worth of the company shares to benefit from the pandemic-driven rally.
In response, Block Inc, on Thursday, reiterated that it’s a highly regulated public company and revealed plans of taking legal action against the short seller.
We intend to work with SEC and explore legal action against Hindenburg for the factually inaccurate and misleading report they shared about our Cash App business today.
Wall Street seems to disagree with Hindenburg as well. Its consensus overweight rating on “SQ” is coupled with an average price target of $98 – up 60% from here.
