block: Block Says Cash App Has 44M Verified Monthly Users Following Hindenburg Report
The payment firm also calculated that verified accounts account for roughly 97% of cash inflows through the Cash App.
The disclosure follows a report by Hindenburg Research last week that former Block employees assessed between 40% and 75% of the accounts they viewed were fake, involved in fraud, or were additional accounts linked to a single person.
After opening a short position in Block, the report claimed that the payments firm was headed by a co-founder of Twitter. Jack Dorsey overestimated the number of Cash App users and underestimated customer acquisition costs.
Block denied the allegations, saying it would consider legal action against the short seller for its “factually inaccurate and misleading report” which was “intended to deceive and confuse investors.”
Hindenburg, who was also behind the over $100 billion market debacle in India. Adani Group said in late January that Block was “confusing” the number of people on the platform by reporting “misleading rates of active transactions filled with fake and duplicate accounts.”
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However, Wall Street analysts were sanguine about Block’s outlook and said that most of the issues Hindenburg raised were known and the accuracy of the company’s financial statements had not been questioned. “It is difficult to both refute and confirm any of the allegations being made, but these allegations will certainly get the attention of regulators,” Piper Sandler Analysts reported this to their clients on March 23.
The actions of the short seller are seen as a challenge to Dorsey, who co-founded Block in 2009 from his San Francisco apartment with the goal of shaking up the credit card industry.
Block shares rose more than 2% in the afternoon.