After targeting Adani Group, Hindenburg attacks Jack Dorsey's Block, says it overstated user numbers

By India Today Business DeskAfter targeting the Adani Group, US short-seller Hindenburg Research on Thursday accused Twitter founder Jack Dorsey-led payments firm Block Inc of “overstating its user counts and understating its customer acquisition costs”.

It said former Block employees estimated that 40%-75% of accounts they reviewed were fake.

Hindenburg Research said its two-year investigation on Dorsey’s Block “revealed the company’s willingness to facilitate fraud against consumers and the government”.

The US short-seller firm said it held short positions in Jack Dorsey’s Block Inc.

Block share price declined 20% to $58.35 at 8:53 am in New York in US premarket trading, according to a Bloomberg News report.

“Our two-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The ‘magic’ behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics,” Hindenburg said.

Hindenburg Research said its research indicated that Block had wildly overstated its genuine user counts and had understated its customer acquisition costs. “Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual,” it said.

The US short seller’s report comes just two months after its allegations against the Adani Group.

Hindenburg Research in a report in January accused the Adani Group of financial irregularities and stock manipulation. The Adani Group denied the allegations and said no wrongdoing had been committed by it.

The Adani Group’s total market capitalisation as of February 21 was approximately Rs 8.2 lakh crore, which is less than half of Rs 19.2 lakh crore as of January 24.