Yahoo Finance’s Ines Ferre discusses a drop in shares of Block after a report from Hindenburg Research made serious allegations against the payment company.
Video Transcript
SEANA SMITH: Let's get to another top story, and that is the movement that we're seeing in Block today. Shares plunging, off just about 15%, so off the lows of the day with just under an hour to go in the trading day. Now, this drop comes following a report here from known short seller Hindenburg. Made serious accusations against the company, accusing Block of having fake or duplicate Cash App accounts, avoiding regulations, and embracing criminals.
Hindenburg stated that its conclusion is that Block, quote, "misled investors on key metrics and embraced predatory offerings and compliance worst practices in order to fuel growth and profit from facilitation of fraud against consumers and the government."
Joining us now with more on that, Yahoo Finance's very own Ines Ferré. And, Ines, Block did not waste any time. They fired back at these accusations, calling them all untrue.
INES FERRÉ: Yeah, that's right, and that statement from Block came at around 1:45 PM Eastern Time. The Hindenburg report was published this morning prior to the market open, and you saw Block stock down as much as 20% when the market opened. Then in the afternoon, we got the statement. You saw part of the statement that you just read, also with Block saying that they intend to work with the SEC and explore legal action against Hindenburg Research for what they call factually inaccurate and misleading report.
Now, this report is a very damning report. I mean, it has a scope of allegations in it, including that Block allegedly gouged merchants on fees, that it wildly overstated its genuine user counts and has understated its customer acquisition costs.
Now Hindenburg Research, this is the same short seller that about two months ago levied accusations against Indian conglomerate Adani Group. Back in 2020, you'll recall that Hindenburg put out a report targeting the EV maker Nikola, remember, with that reference to the truck that was rolling downhill.
So certainly broad allegations here against Block. We saw the stock lower this morning. Then it pared some of those losses. It was down about 10% or 11% around midday. Now it's down about 15%, guys.
DAVE BRIGGS: Yeah, again, at the core of this, that they allowed criminal activity and fraud, and a former employee told Hindenburg 40% to 75% of their accounts are fake.
Ines Ferré, thank you so much.
