Shares of Twitter founder Jack Dorsey’s fintech firm Block fell 15% on Thursday after the company was targeted by professional short sellers.
The fall in Block’s share price came as short selling firm Hindenburg Research announced that they had taken a short position in Block, Inc., a company led by the well-known Bitcoin (BTC) proponent Jack Dorsey.
Formerly known as Square, Block operates the popular Cash App mobile payment app in the US and the UK. Among other things, the app allows users to instantly send money to each other, and to buy and sell bitcoin.
Inflated user metrics & insiders cashing out
In an announcement posted on its website and in a detailed Twitter thread on Thursday, Hindenburg claimed a 2-year investigation of Block has revealed that the company inflated its user metrics and enabled insiders to cash out more than $1 billion when share prices were near the top.
“Our research shows [Block] has wildly overstated genuine user counts & understated customer acquisition costs for years,” Hindenburg wrote in one of the tweets.
The short selling firm also said that former employees of Block have told them that many Block users have “dozens, or even hundreds of accounts” in their name, and that this vastly inflates Block’s user metrics.
Hindenburg further alleged in its research that Block’s claim that it helps “unbanked and underbanked” people was merely a slogan to cover up the realities. In reality, Block “systematically exploits the demographics it claims to help,” another tweet from Hindenburg said, while adding that one segment of the population that uses Block actively is criminals.
Shares fall
Following the announcement of Hindenburg’s short position, Block’s shares fell some 15% for the day on Thursday on unusually high trading volume.
The stock ended the day at $61.88, but continued lower in pre-market trading on Friday morning, trading at $61.30 one hour before the trading session started on Friday.
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