March 24 (Reuters) – Shares of Twitter co-founder Jack Dorsey’s Block Inc (SQ.N) fell 4% in premarket trading on Friday, after the US short seller of the payments firm’s cash app business became the latest target of Hindenburg Research. a day later
In a report, Hindenburg alleged that Block exaggerated its user numbers and underestimated customer acquisition costs.
The company called the report “factually incorrect and misleading” and said it would work with the US securities regulator to explore legal action against Hindenburg.
Block shares closed down 15% on Thursday, giving up all the gains it made so far this year. They lost 61% of their value last year amid a widespread selloff in the technology sector.
Brokerage RBC Capital Markets said the report will have a negative impact on shares for some time, but kept its view on the stock unchanged.
Hindenburg also said in its report that while CEO Dorsey cited mentions of Cash App in hip-hop songs as evidence of its mainstream appeal, its review suggests rappers are calling it a “scam, traffic drugs or even describe it as a means of “paying for the murder”. ,
Morningstar analysts said the rappers’ actions are not compelling evidence of wider issues, but more troubling is the allegation that the block is aware of widespread fraud on its platform.
The report cited a non-profit organization that said the Cash app was “by far” the top app used in reported US sex trafficking.
Brokerage Jefferies said in a note that most of the issues raised by Hindenburg are known to investors, while pointing out that the short seller has not questioned the accuracy of the company’s financial position.
Short sellers typically sell borrowed securities with the aim of buying them back at a lower price.
Reporting by Manya Saini in Bengaluru; Editing by Arun Koiyur
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Source: www.bing.com
