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Block is run by former Twitter CEO Jack Dorsey.
Drew Angerer/Getty Images
Block
stock rose Thursday after the payments group responded to some of a short seller’s allegations.
Last week, Hindenburg Research disclosed a short position in the company, alleging that Block (ticker: SQ) had inflated user metrics and didn’t rein in illicit activity by users on its Cash App platform. A short position is a bet that a stock will fall: Traders who try it borrow shares of a company and then sell them, hoping to buy them back later at a lower price.
Block stock dived 15% the day after the Hindenburg report—closing March 23 at $61.88—and jumped 3% by midday this Thursday to near $68.50.
Block said last week the report was inaccurate and that it would explore legal action against Hindenburg. On Thursday, in response to what it described as questions from investors about improper activity and fraud on the platform, the company said it had “denylisted” 2.4% of Cash App accounts making transactions last year. This process prevents sending and receiving funds, using a Cash App Card, taking a loan, or buying stocks or Bitcoin, among other things.
“Building a trusted platform and combating fraudulent and other illicit activity is a top priority for Cash App and Block more broadly,” the company said.
Hindenburg had cited former employees as saying 40% to 75% of accounts they reviewed were fake, tied to fraud, or among multiple accounts linked to the same person. That would fundamentally change the calculus behind estimates for revenue and earnings, affecting Block’s valuation by Wall Street.
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