Block Inc (NYSE: SQ) stock found itself in freefall after the payment company was targetted by short-seller Hindenburg Research. SQ stock fell by 20% in a single trading session and struggled to stay at around $58.
The research firm disclosed its short positions on the company on Thursday accusing it of exaggerating its user base and downplaying customer acquisition costs. Block was also accused of allowing criminal activities take place with loose operational control. It used the term “Wild West” for the company’s approach towards its internal system compliance.
Hindenburg Research published its report on its website on Thursday, March 23, 2023. After its 2-year long investigation, the report noted, the firm found that Block Inc. had taken “advantage of the demographics” disguised as help. The mobile payment service of Block, Cash App, was said to gain from its “unbanked” customers.
According to CNBC, the report revealed that among those unbanked customers, which the company was assumed to serve, were people with involvement in criminal activities. Cash App’s compliance was also said to be not up to the mark.
Hindenberg claims to source the company related information from its former employees. They brought insights about the ignorance towards concerns within the company as well related to users. This resulted in ramping up of alleged “criminal activity and fraud” over its payment platform.
In addition, the report claimed, citing Block Inc’s former employees, that 40% to 75% of the reviewed accounts over the platform were fake, likely to be involved in fraud. The company allegedly confused on the number of users over the platform that led to reports of duplicate accounts carrying ambiguous metrics of “transacting active.”
The Hindenburg report put the allegations up around revenue stating that around 892 million USD, accounting up to 35% of Cash App’s revenue, were generated through interchange fees. And it said the amount is liable to be limited by law.
The report said that Co-founders of Block Inc., Jack Dorsecy and James McKelvey, sold off their stocks collectively (worth more than 1 billion USD). The selling of Block shares came in the wake of a jump in the stock price during the Covid-19 pandemic. Finance chief Amrita Ahuja and Cash App lead manager Brian Grassadonia also off-loaded their shares.
Block Stock Price: Gap Down Market, Confused Market Sentiments – Technical Indications
The gap-down market led by some recent reports and confused market sentiments over The Block stock price is evidently testing investor confidence in the market.
The Block stock price opened Thursday’s trading session with a gap down market, taking the price fluctuation till $56.57. However, Block share price closed Wednesday’s trading session at $72.64 and the sudden price drop can be observed due to the price gap on the opening of Thursday’s trading session.
The SQ stock price has suddenly dropped below the 20-, 50-, 100- and 200-days Daily Moving Average.
Technical indicators suggest strong downward velocity of SQ stock price. Relative strength index showcases the downtrend of SQ shares over the daily time frame chart.
MACD exhibits the drop in the price of SQ share price as the MACD line is below the signal line, registering a negative crossover.
Technical levels
Support Levels: $56.75 and $55.00
Resistance Levels: $65.90 and $67.40
Disclaimer-
The views and opinions stated by the author, or any people named in this article, are for informational purposes only, and they do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/03/23/jack-dorseys-block-inc-on-hindenburgs-radar-sq-stock-falls/