Accusing the payments company led by Jack Dorsey of overstating its user counts and understating its customer acquisition costs, Hindenburg Research stated on Thursday that it held short positions in Block Inc.
Jack Dorsey, co-founder of Block Inc., experienced a significant decline in his net worth following the release of Hindenburg Research’s latest report. On Thursday, Hindenburg Research revealed that it had short positions in Block Inc. which accused the payments company of ignoring widespread fraud. An investigation conducted over two years found that Block has been exploiting the demographic it purports to help, with a significant percentage of the accounts investigated being either fake, fraudulent, or tied to a single individual. The investigation involved extensive interviews with former employees, partners, and industry experts, thorough reviews of regulatory and litigation records, and FOIA and public record requests.
On Thursday, his fortune dropped by $526 million, marking his worst single-day decline since May. This 11% decrease left Dorsey with a net worth of $4.4 billion, according to the Bloomberg Billionaires Index. Hindenburg’s report suggested that Block had inflated user metrics and that the stock had a downside of 65% to 75% based on fundamental analysis.
The company has denied these allegations and plans to pursue legal action against the short-seller. On the day of the report’s release, Block’s shares fell as much as 22%, closing down 15%. Dorsey’s personal fortune is mainly tied up in Block, with the Bloomberg wealth index estimating his stake in the company to be worth $3 billion, while his position in Elon Musk’s social media company is valued at $388 million.
Hindenburg Research – An Activist Investment Research Firm
Hindenburg Research LLC is an investment research company that specializes in activist short-selling. The firm spends six months or more investigating a target company, reviewing its public records and internal corporate documents, and conducting interviews with its employees, after which it produces a research report.
The report is then shared with Hindenburg’s limited partners, who, along with Hindenburg, take a short position in the target company. Hindenburg generates profits when the target company’s share price falls. Hindenburg has concentrated on around 30 companies since 2020, leading to an average decrease in the share price by 15% on the subsequent day.. Among the companies targeted in their reports are Adani Group, Nikola, Clover Health, Block Inc., Kandi, Lordstown Motors and many more.
Hindenburg Vs Adani & It’s Aftermath
The Adani Group has suffered a heavy sell-off of stocks leading to a loss of more than Rs 12 lakh crore after the release of the Hindenburg report accusing the group of “brazen stock manipulation and accounting fraud for decades.” A month after the report was released, the Adani Group’s market capitalization has fallen over 60%.
Adani Green Energy, Adani Total Gas, and Adani Transmission have plunged over 70%, while Adani Enterprises shares have lost over 60%. Adani Ports, Adani Wilmar, ACC, and Ambuja Cements have also fallen over 25%. Gautam Adani and his companies have been under intense scrutiny since the release of the Hindenburg report, and Adani has slipped to the 28th from 2nd positions on the Bloomberg world billionaires lists. Adani’s personal wealth eroded by over $107 billion.