Short seller Hindenburg’s Report to Post a Rise in Quarterly Revenue Is Shaken by Jack Dorsey’s Block

Block reported higher first-quarter revenue on Thursday as its popular payments platform Cash App drove growth, a metric investors will closely monitor following the disclosure of short positions in the company by US short-seller Hindenburg Research in March.

Block, formerly known as Square, was up more than 1% in extended trading on Thursday, paring gains after rising more than 4% earlier. Prior to the market close, its stock had dropped more than 10% since the beginning of the year.

According to Refinitiv data, the company reported total net revenue of $4.99 billion (roughly Rs. 40,800 crore) in the quarter ended March 31, up 26 percent from the previous year and beating analysts’ estimates of $4.59 billion (roughly Rs. 37,500 crore).

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The San Francisco-based fintech, which provides merchant payment services as well as an app that allows people to make peer-to-peer payments and trade cryptocurrency, reported a 32% increase in first-quarter gross profit to $1.71 billion (roughly Rs. 14,000 crore).

Hindenburg, whose report earlier this year triggered a sell-off of more than $100 billion (roughly Rs. 8,17,200 crore) in shares of Adani Group companies in India, had accused Block of exaggerating its user numbers by allowing fake or duplicate accounts to exist on its Cash App platform. The allegations caused a 22% drop in the company’s stock.

The claims made in the report could not be verified by Reuters. Block has denied the allegations and stated that it intends to pursue legal action against the short seller. Short sellers, such as Hindenburg, typically sell borrowed securities with the intent of repurchasing them at a lower price.

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Block CEO Jack Dorsey stated the company stands by its response to the report during a conference call with analysts.

We won’t let our priorities and strategy get in the way, he declared. “In each of our ecosystems, we have a pretty compelling roadmap ahead of us.”

Block’s revenue growth has slowed down over the last few quarters as consumers have put off major purchases due to inflation. The payments company stated in its most recent earnings report that it was “meaningfully slowing” the pace of hiring this year in order to control costs.