Topline
Block threatened to take legal action Thursday against Hindenburg Research, the firm that issued a scathing report alleging a web of fraud at the financial technology giant led by billionaire CEO Jack Dorsey, inspiring a massive loss in market value for Block.
Jack Dorsey testifies before Senate in 2018.
Key Facts
Hindenburg’s report was “factually inaccurate and misleading,” Block said in a statement issued at about 1:40 p.m. ET, about five hours after the Hindenburg announced it took a short position in Block armed with a mountain of claims that the Cash App parent company sought to defraud investors.
Block said it intended to “explore legal action” against Hindenburg, who sought to “deceive and confuse” Block investors to “profit from a declined stock price.”
The response did little to calm investors, as shares of Block sank a further 2% following its release to $61.38, down a whopping 15.7% in Thursday trading by 2:30 p.m. ET.
That’s the fourth-worst daily loss in the stock’s 7.5-year history, moving against a broader tech rally as the tech-heavy Nasdaq gained 0.7%.
Big Number
$778 million. That’s how much Dorsey’s net worth fell Thursday as Block share prices plunged, dragging his fortune down to $4.2 billion, according to Forbes’ calculations. Jim McKelvey, Square’s other billionaire cofounder, lost $197 million Thursday.
Key Background
Hindenburg alleged a variety of issues at Cash App, including the “facilitation of fraud,” “lapses” in regulatory compliance and “supporting” criminal activity. Block is also the parent company of the business payments service Square and the music streaming service Tidal.
Surprising Fact
Block was the worst-performing U.S. stock Thursday, according to Yahoo Finance data, outpacing even cryptocurrency exchange Coinbase’s 14.5% loss after Coinbase disclosed it may have violated federal securities laws.
Further Reading
Billionaires Dorsey, McKelvey Profited From Block’s ‘Rampant’ Fraud, Hindenburg Alleges (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/03/23/block-vows-to-fight-factually-inaccurate-claims-from-short-seller-hindenburg/