Big Short Seller’s Allegations About Block Don’t Make Block Look Too Good
Block, the parent company of Square Loans, suffered a rough day in the market (down 15%) on Thursday after an activist short seller made bombshell allegations about the way Block conducts its business. Hindenburg Research, the short seller, posted a report of alleged findings it had uncovered over a period of two years. In Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion, the report focuses almost entirely on alleged shenanigans with Cash App. Block has often been referenced in the pages of deBanked because of its massive small business lending subsidiary, Square Loans, which last year originated $4 billion in funding to merchants. That subsidiary was not the subject of the report.
While one can read the report on their own and form their own opinion, which the authors hope to profit from by Block’s stock going down, it should be noted that the timing of its release is a little suspicious. Block, for all the bells and whistles it has in payments and lending, is at its core these days, a crypto company. Block generated $7.1B in revenue just off of Bitcoin alone in 2022, perhaps making it an easier target given the string of recent events.
3/12/23
- Regulators shutter Signature Bank. Rumors abound that it was less about solvency and more about governmental dislike of its crypto clientele.
3/22/23
- Coinbase reveals that it received a Wells Notice from the SEC
- Tron founder Justin Sun sued by the SEC
- Several celebrities including Lindsay Lohan charged by the SEC for failing to disclose compensation they received for crypto promotions
- The President published his annual Economic Report which referenced crypto with astounding frequency
3/23/23
- Hindenburg Research releases its report about Block, causing the company stock to plummet 15% in a day. Although the focus is not on crypto, Block’s big revenue generator is Bitcoin, which generated $7.1B in revenue for the company in 2022.
Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.
