SQ -18%: What Happened and How Will SQ Move?

$Block(SQ)$ fell 18% yesterday on short-seller report. Hindenburg Research released a report based on a two-year investigation, accusing Block of inflating user numbers.

Hindenburg claimed that

Block has wildly overstated its genuine user counts and has understated its customer acquisition costs.

However, Block said it was exploring legal action against the short-seller.

Hindenburg's report was "factually incorrect and misleading" and "designed to deceive and confuse investors.

Cash App Was Targeted: Will compliance issues affect the company's financials?

Cash App is the most important driver of Block, which also been heavily criticized by Hindenburg for facilitating criminal activities.

1. Cash App was used to steal billions from unemployment benefits during the pandemic

During the pandemic, Block made it easy for people to accept stimulus checks and unemployment benefits from the Cash App, which helped drive a surge in its use. As of last December, the Cash App had more than 51 million monthly active users, more than double the pre-pandemic level.

Block's popular Cash App may have facilitated scammers to take advantage of government stimulus programs during the pandmeic.

Source: Hindenburg's report

In response to a request for public records, Massachusetts told the short-selling agency that the state seeks to recover more than 69,000 unemployment payments from the banks behind Cash App accounts.

All in all, multiple failures in Cash App's compliance process help scammers steal billions of dollars from government payments.

2. Fake accounts make Cash App facilitate criminal activity

Even if a user is found to be engaged in fraud or other prohibited activity, $Block(SQ)$ only blacklists the account without prohibiting the user from using it.

Former Cash App employees interviewed by Hindenburg estimated that

a large percentage of Cash App accounts were likely to be fake, fraudulent, or linked to a single individual.

The fake accounts issue is closely related to the key points that Block overstated its genuine user counts

Cash App's compliance controls were another target of Hindenburg's attack. The short-seller cited court documents showing that law enforcement agencies said criminals used Cash App to move drug money or pay for sex traffickings.

What will happen to Block's share after Hindenburg's report?

For reference, Hindenburg has targeted about 30 companies since 2020, whose stocks fell an average of about 15% the day after the reports were issued and an average of 26% six months later.

Hindenburg has also previously issued short-selling reports against electric truck maker $Nikola Corporation(NKLA)$ and Indian conglomerate Adani Group. Nikola's founder was later convicted of securities fraud.

Hindenburg's short-selling report focused on Cash App's compliance issues, and it remains to be seen if this issue will affect Block's financials.

Conclusion

From the perspective of individuals, the loose compliance constraints facilitated criminal activities and the company needed to rectify them.

But from an investor's perspective, Hindenburg's short-selling report puts too much emphasis on humanitarianism and might be groundless in terms of financials.

Was Block oversold yesterday?

How do you view this shorting report?

Do you choose to short or bottom Block?

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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  • koolgal
    ·2023-03-26
    TOP

    🌟🌟🌟After the Fear and Contagion of the recent Bank runs, it is not surprising that $Block(SQ)$  has been oversold by nervous investors on news of the Damaging Hinderberg Research. 

    Whether this report is true or otherwise, remains to be seen as it is too early to tell pending further investigations by the authorities.

    Nonetheless Cathie Wood is a big supporter of $Block(SQ)$  and if the report is false then she stands to gain.   

    This report is a very serious allegation on the integrity of Cash App, the centrepiece of $Block(SQ)$  .  It is important that Block management refute the allegation by showing proof that the report is not true. 

    Until such time, I would stay clear of investing in $Block(SQ)$  as its share price may plummet further.  The current environment is not conducive to taking risky bets even if it is to short the stock. 

    @Tiger_chat  

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    • koolgalReplying toEDWINHLC
      Thanks
      2023-03-28
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    • EDWINHLC
      [Like]
      2023-03-28
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    • koolgalReplying toOptionspuppy
      I have just reposted your article as requested.
      2023-03-26
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  • LMSunshine
    ·2023-03-25
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    I think the sell-off for $Block(SQ)$ will continue given Hindenburg’s “success” of making his targetted stocks fall an average of about 15% the day after the reports were issued and an average of 26% 6 months later.I would definitely avoid going long on SQ the next 6 months😅 Coins🥰 @SR050321 @CYKuan @HelenJanet @rL @Universe宇宙 @Jadenkho @melson @Mrzorro @GoodLife99 @SPOT_ON @Kaixiang @BenjiFuji @RDPD富爸穷爸 @SirBahamut @b1uesky @MHh @PJoo @Pepermintpat @RiciaYang @jat @Omega88 @爱上投资学 @Zeniv @Elon2 @Yonhuat @Joker_Smile @grizzlylee @FrankieRed @spkek @snoopy123 @psk @pekss @amroui @Ericdao @StarLuck @Shyon @Success88 @kungpao @CL Wong @Derrick 1234 @MeowKitty @Thonyaunn @紫南 @Zarkness @Ah_Meng @Ratt @Tigress02 @Viv22 @aunteenat @airui @0QH @Cris0 @Brocco @AhGong @deal2deal @Ccl2 @Lcc73 @HLPA @WanEH @markele @pipiso @hlw8888 @Huiz84 @Kingcat @Jo_Tan @RedpillBluep @Furore @breAkdaWn @boardy @Cory2 @Soyabean89 @ngph @KYHBKO @Lionel8383 @Downton @SanWangtikup @Setia100 @th0mastan @LesterTan
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    • Universe宇宙
      [ShakeHands] [Like]
      2023-03-25
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    • LMSunshine
      Thanks loads @Tiger_chat for another interesting discussion💕💕💕 Have a great weekend❣️
      2023-03-25
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  • LMSunshine
    ·2023-03-25
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    Comment in post for coins🥰 @IAS @HSTew @Kerrisdale @PhilipChow @alylady @moliya @maricel @Sonoma @LuckyPiggie @Doge2theMoon @equitygenius @StayHome @SGboy @Sandyboy @Stayclose @DMTrader @BettyT @Bunta @tigjun21 @JohnL @jace0777 @DoreamonGo @TTrade @VonCat @boonk @Trevelyan @jgaldon @fxaw @Kok @Agxm @Dodonan @BubTigger @Niskil @OddEyeCircle @StarAce @zerolih @WuDi @Asphen @MasterStonker @MoneyCub @MiniAce @StayCalm @ee244c @Huangyulee @tarotsgirl @Lord_Kuberan @ShengSoon @Decromer @jllwang @Shiella @cristine @Gunawanh @WLing @Zash @Snoopymint @GrumpyDino @YTGIRL @VivianChua @MSJYJ @YJ13 @Bons @bernardtayet @Kindryl @angyenyen @KBWSG @JazzyTizzy @icycrystal @aiyoh79 @drandy @eeth @Zack44 @Cyberguard @kaite @BlueDragon @Tonyoh @AlfonsoDex @nerdbull1669 @InvisibleTig @AlanTiger @kwk @InvisibleP @miaomiao007 @TigerHulk @MGOH @Alconies @justforcoins @cubinvestor @我i168 @Zacv @ZeroG @JennyChiang @Star0331
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  • Kaixiang
    ·2023-03-25
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    It is possible that the short selling report is true to a large extent given that regulations in this area have not been tight. This report is a strong trigger for sell-off since Cash app also acts as bitcoin wallet, and the recent crypto fraud / illegal activities have been plastered all social media.
    As retail investors, it is hard to ascertain the extent of impact given limited info available. There may be short term dead cat bounce but the future can be rather uncertain, for example government imposng strict regulations and how that might impact the overall Cash App operations and business.
    As a risk averse investor, I typically avoid scooping under such circumstances. Might be better to look for other fundamentally strong stocks [Happy]
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  • Tiger_comments
    ·2023-03-29
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    @Niskil @pjekn @Optionspuppy @koolgal @Bons @Joker_Smile @Thomastank @第N次大变革大分流 @GoodLife99 @Zarkness @ALLinOne @Kaixiang @FrankieRed @TTrade @pekss @moliya @tigernoob @fxaw @Zeniv @LMSunshine @RT2022 @StickyRice @highhand @KryZ Thank you for commenting on my post. Your coins have been sent to your account~ Don't forget to check your tiger coins💖
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    • KryZ
      Thank you. 😊
      2023-03-29
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    • Bons
      thank you
      2023-03-29
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    • Zarkness
      Thank @Tiger_chat and let’s celebrate together !! 😘😘
      2023-03-29
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  • GoodLife99
    ·2023-03-25
    TOP
    Thought it will be a good buy from yesterday sell off as there was a new sis Cathie Wood top up for $Block(SQ)$, based on the company fundamental, do not have confident for long investment for $Block(SQ)$ & I do not choose to short as I'm always a long investor [smile], but don't think it's already bottom for now
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    • GoodLife99Replying tohappygo
      I do not own this stock & not intended to buy, yet it may be a great bargain if the price hit close to $50 It's all your own decision cox you will kill me if the price shoot up later just like a speed train [Tongue]
      2023-03-26
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    • GoodLife99Replying towimpy
      Experienced caught the falling knife in the past for particular stock which I thought it's a great deal after few days fallen..yet saw a lot of scenario that spike after a great falls
      I wish I have the answer for you..  [shy]
      2023-03-26
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    • happygo
      so what your choice is hold?
      2023-03-26
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  • Zarkness
    ·2023-03-25
    TOP
    Its oversold and will stay that way for a while… a 6m-1y of no touching for me. The environment is also bad for tech as rates are high… so double confirm no touch . Will pick up later on .
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    • Zarkness
      😊💕
      2023-03-27
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    • Zarkness
      Yeah…
      2023-03-27
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    • Zarkness
      Thanks… just my thoughts and sharing ..
      2023-03-27
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  • pekss
    ·2023-03-25
    TOP
    Block has hit back with threats of regulatory actions against the activist short seller. Only time will uncover if the company is indeed so rampant with ststemic frauds. Even if anyone can just order a card from Block in another person’s name as the report has claimed, the new card will still need to be authenticated like any bank card before it is activated for transaction use. So it is hard to believe the report in its entirety.
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    • wubbie
      it is so complicated for me to understand its behaviour
      2023-03-25
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    • pekss
      * ”Systemic” frauds
      2023-03-25
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  • tigernoob
    ·2023-03-25
    TOP
    use volume n price action to help determine if it is a continuation short or to figure out if a bottom is forming.

    short reports are just opportunities and create volatility for price discovery.

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    • glitzy
      sometime it is helpful, but not always
      2023-03-26
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    • riffy
      thanks for sharing
      2023-03-26
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  • Bons
    ·2023-03-26
    TOP
    since Hindenburg usually does the deep research before going into the action, then the strike mostly hit on target. $Block(SQ)$ will be in deep trouble for some time in the future. I'll take a position in short sell just the Hindenburg publish its report and realize the profit as quickly as possible. it's better to play safe than sorry.
    how's yours @Viv22 @LMSunshine @KYHBKO @Tigress02 @Universe宇宙 @kungpao @wine18 @cindyft @Xian789 @MTok
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  • LiverpoolRed
    ·2023-03-25
    I think it is better not to go in for SQ now. If the finding is true, the share price will drop even further. Better to wait for another 3 months to have a clearer picture of the findings.
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  • moliya
    ·2023-03-25
    thank you @LMSunshine ....
    this hidenburg made huge money by giving report against Adani group in India following this stock fell lot... making huge losses to some investment bank and firms.....
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  • fxaw
    ·2023-03-25
    Since beginning, I'm not interested with $Block(SQ)$, not really believe its products offering.
    In the other side, in its history, not all Hindenburg's 'accusation' were correct. Somebody needs to scrutinize the 'accusation' and the facts. It is different with Adani's case whereby several parties already gave 'alerts' even before Hindenburg's action.
    In short, it will take time to see the 'truth', waiting a scrutinizing process and the $Block(SQ)$ 's defense.
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  • RT2022
    ·2023-03-24
    Effected by market condition and short seller want to make $ myself will stay away from it because it may continue to go down unless want to monitor closely know when to cut loss $Block(SQ)$ or wait the bottom ? It is not easy if short seller already targeted it, just like $AMC Entertainment(AMC)$ unless the company is profitable and good prospect just like $Meta Platforms, Inc.(META)$ went down but finally now come up again 👍
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  • StickyRice
    ·2023-03-24
    Hindenburg's primary target in the report relates to its Cash App. Keen investors should know that Block's Cash App is the company's critical growth driver, which saw a massive uplift during the pandemic. The forensic research firm presented a detailed account of how Block could have overstated its Cash App growth user metrics by between 40% to 75%. Also, it "embraced" fraudulent accounts and criminal activity on its platform to drive user growth and SQ's stock price during the pandemic. Jack Dorsey & his team could potentially face an investigation by Block's regulators, as it's hard to ignore the claims in Hindenburg's report.
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  • KryZ
    ·2023-03-24

    Wow. Interesting  that Hindenburg Research has gone after  Jack Dorsey's SQ.

    Let's see how Block  fight back against the short seller since it's claiming its "factually inaccurate and misleading report" that was "designed to deceive and confuse investors".


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  • $Block(SQ)$ 可以继续做空block,买入其put,本来就认为这家公司问题很多,估值哪怕跌去一半也不便宜,恰恰逢连战连胜的Hindenburg发布做空报告,可以放心做空了,block其实和ark持有的很多公司一样,都是连故事概念都捉襟见肘的泡沫成长股,泡沫破灭后一地鸡毛。
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  • Thomastank
    ·2023-03-25
    Important to remain calm if your believe in Block’s fundamentals. CashApp is not going away, and once compliance issues are resolved there should be a rebound!
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  • GoodLife99
    ·2023-03-25

    Come share your views for $Block(SQ)$  

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    • icycrystal
      thanks for sharing
      2023-03-27
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    • Bi Han
      BULLISH
      2023-03-26
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  • moliya
    ·2023-03-25
    @LMSunshine where can we follow hindenberg repots
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