How Jack Dorsey lost over $500mn after latest Hindenburg report
Hindenburg Research, whose report battered the shares of Indian conglomerate Adani Group, has found a new target: Jack Dorsey's Block. In its report, the short-seller alleged Block ignored widespread fraud and accused the company of misleading its investors. Following the report, the company's shares fell as low as 22% (closing at 15%), wiping out Dorsey's net worth by $526 million.
Why does this story matter?
Hindenburg Research rose to fame after it took on the then-richest man in Asia, Gautam Adani. The report led to the conglomerate losing around $140 billion in valuation. Prior to that, the short-seller single-handedly brought down electric vehicle company Nikola which duped investors with vehicles that never existed. Therefore, its report is ominous for both Dorsey and Block.
Hindenburg accused Cash App of housing fake accounts
In its 176,000-page report, Hindenburg accused Block of overstating its user base and turning a blind eye toward rampant fraud and illegal activity on its platforms, especially Cash App, its mobile payment service. Per the report, there are multiple fake accounts on Cash App. Hindenburg also alleged Cash App was used for fraudulent pandemic relief applications.
Block ignored warnings from employees and government: Hindenburg
The report accused Block of ignoring "obvious signs of fraud despite warnings from employees and the government." Hindenburg also accused Cash App of being a haven for criminal activities, including payments for illegal drug sales and sex trafficking. Surprisingly, the short-seller cited several rap lyrics as evidence for this. The rappers are describing scamming, trafficking drugs, and paying for murder, the report said.
Block threatened legal action against Hindenburg Research
Block is not going to sit aside and chew on Hindenburg's allegations. Instead, the company wants to come out swinging. In a statement, Block called Hindenbur's report "factually inaccurate" and "misleading." The company also threatened legal action against the short-seller. What stands out, however, is that Block did not refute any specifics of the report.
Hindenburg's report reduced Gautam Adani's wealth by $60 billion
Hindenburg makes money by betting against companies. It finds systemic issues with companies, publishes a report on that, and watches the shares of the said company crumble. The short-seller's report accusing Adani Group of accounting fraud and stock manipulation affected all listed companies of the conglomerate. Gautam Adani went from the third richest in the world to the 21st richest.
