Block Share Price Tumbled: Hindenburg blames firm of $1 billion fraud!

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Hindenburg short on Block shares
  • Hindenburg disclosed a short position in Block and accused the firm of financial wrongdoing
  • Block vowed to fight back claiming Hindenburg’s claims are baseless and misleading
  • The report claimed that majority of Block’s customer accounts were fake 

Ex-Twitter CEO Jack Dorsey led Block Inc share prices tumbled 15% on Mar 23, 2023 after notorious short seller Hindenburg Research posted a scathing report, blaming the firm for orchestrating a $1 billion fraud! 

Block share prices recorded their worst session since May 2022 following the report. Hindenburg Research is the same organization which earlier this year targeted Adani stocks of financial mismanagement which sent Adani stocks tumbling down.  

Block Share Price: Historical Price Performance

What is short selling?

The act of short selling involves borrowing shares, selling them, and buying them back at a lower price to gain profit. 

However, if the stock price rises, short sellers may end up losing money instead. Hedge funds and institutional investors mainly engage in short selling to protect their investments from falling stock prices or to make bets that share prices are too high. 

On the other hand, activist shorts like Hindenburg conduct research to identify companies they believe engage in unethical business or accounting practices, disseminate their findings (sometimes anonymously), and aim to decrease the stock prices of those companies.  

Although activist shorts have been active for many years, their numbers have increased significantly due to the use of social media as a platform to spread their theories and analyses. 

Block Share Price: What does the Hindenburg report say?

  • The report claimed that Block took advantage of its clients. Block facilitated fraud against consumers and the government, avoided regulation, dressed up predatory loans and fees as revolutionary technology, and misled investors with inflated metrics. 
  • Block’s Cash App Platform, wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake. 
  • Hindenburg Research also claimed that Block’s share price has a 65%-75% fundamental downside from current levels, even if investors were to ignore our investigation entirely. 

Block Share Price: What does Hindenburg Research do?

Hindenburg is a research company founded by Nathan Anderson, who is known for his short-selling tactics.  

Although the company claims to use its own capital for forensic research, it operates like a typical activist short-seller. After conducting research on a potential target, Hindenburg bets on the stock declining and publicly shares its findings through social media.  

Anderson's firm gained notoriety for raising questions about electric-vehicle makers Nikola Corp. and Lordstown Motors Corp. in 2020 and 2021.  

In February, Hindenburg released a 100-page report accusing the Indian conglomerate Adani Group of inflating revenue and stock prices using a network of companies in tax havens, despite mounting debt. Adani dismissed the allegations as unfounded and an intentional attack on India. 

Block Share Price: Analyst View 

  • Brokerage Oppenheimer has a ‘buy’ rating on the firm
  • Piper Sandler has an ‘overweight’ rating on the firm with a share price target of $103.
  • Macquarie Research has an ‘outperform’ rating on the firm with a share price target of $100.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.