Risk, returns & timeframes illustration
1 min read
March 27, 2023
by
Regan Pearson

Chip off the old block 🪓

Seems like Block’s gone a little bit gangsta and now Hindenburg Research’s firing shots. Block’s Cash App is popping off in rap lyrics and now report-writing short seller Hindenburg’s taken aim. Where there’s smoke there’s fire?
Risk, returns & timeframes illustration
1 min read
March 27, 2023
by
Regan Pearson

Chip off the old block 🪓

Seems like Block’s gone a little bit gangsta and now Hindenburg Research’s firing shots. Block’s Cash App is popping off in rap lyrics and now report-writing short seller Hindenburg’s taken aim. Where there’s smoke there’s fire?
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Saddle up partners, there’s a new sheriff in town. 🤠 Short seller Hindenburg Research has been making a strong impression on the financial frontier, targeting companies they think are just not up to muster. Short sellers make money when share prices fall. Earlier this year Hindenburg accused colossal India conglomerate Adani of being ‘the largest con in corporate history’, news that wiped US$140 billion off the company’s market valuation. 📉

Last week Hindenburg changed their target. 🎯 They set their sights on Jack Dorsey’s super app company Block (SQ) issuing a stinging report against a number of Block-owned companies. The list includes Block’s US$29 billion Buy Now, Pay Later (BNPL) and TikToker’ darling, AfterPay, which Hindenburg claims is flopping as people buy less and increasingly fail to pay later.

But it’s Block’s peer-to-peer payments system Cash App that has drawn the most fire from Hindenburg. 💥🔫 The short seller alleges not only that Block has been overstating their number of users, but that the platform has become the Wild West for drug dealing criminals and gangsters. Hindenburg alleges the app is so popular with outlaws that a gang was named after it. Could there be a reason Cash App is name-dropped in crime-related rap lyrics?! Smoke… fire? 🔥

This is a big deal for Block. Cash App made up around half of the company’s gross profit in 2022, and the news swiftly took a chip off the old Block’s share price, sinking it 20%. 🪓

Block fired back with their own Eagle butt peace-maker denying the allegations and calling them ‘factually inaccurate and misleading’. But when Hindenburg rides into town with news, investors tend to listen. The investment research firm has a growing track record. In 2020, Hindenburg accused electric truck maker Nikola (NKLA) of being a ‘fraud built on lies’. Shortly after, Nikola founder and CEO Trever Milton was arrested and convicted of, erm, fraud. That’s one outlaw that won’t be riding off into the sunset anytime soon. ☀️

Regan Pearson
Finance writer
Linkedin

We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.

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