Hindenburg shorts Dorsey’s Payments Firm [UPSC Current Affairs]

Hindenburg Research disclosed short positions in Block Inc and alleged that the payments firm led by Twitter co-founder Jack Dorsey overstated its user numbers and understated its customer acquisition costs. In this article, you can read more about this development. It is a topic relevant for the IAS exam current affairs segment.

Hindenburg shorts Dorsey’s payments firm, shares plunge

• The U.S. short-seller said in its report that former Block employees estimated that 40% to 75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
• Shares of Block slid 20% to $58.39 after this report.
• Dorsey co-founded Block in 2009 with the goal to shake up the credit card industry, and is the company’s largest shareholder with a stake of around 8%.
• The report comes at a time when the outlook for the payments industry has been clouded by worries over the strength of consumer spending in the face of stubbornly high inflation and expectations of an economic downturn.
• Short sellers have made over $400 million in paper profit, according to data from financial analytics firm Ortex. Short interest was 27.96 million shares, or 5.21% of free float.

Hindenburg Research had also accused India’s Adani Group of stock manipulation and accounting fraud scheme over decades. Read more about the Adani Hindenburg issue in the linked article.

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