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Hindenburg Research issued a short report that sent shares of Block Inc SQ down on Thursday. Analysts are sharing their reactions and takes on the allegations from the short seller.

The Block Analysts: Bernstein analyst Harshita Rawat has an Outperform rating and a price target of $90.

Morgan Stanley analyst James Faucette has an Equal Weight rating and a price target of $72.

KBW analyst Steven Kwok has an Outperform rating and a price target of $90.

Oppenheimer analyst Dominick Gabriele has a Perform rating and no price target.

KeyBanc analyst Josh Beck has an Overweight rating and a price target of $100.

Related Link: Jack Dorsey's Wealth Erodes By $526M After Hindenburg Report

The Analyst Reactions: Hindenburg makes claims in the short report that Block overstated user counts, illicit activity was prolific on Cash App, and there were compliance issues.

The most serious allegations, in our view, were around Blocks intentionally lax compliance policies around illicit activities & fraud on its platform and the estimates that 40% to 75% of accounts could be fake, duplicate or fraudulent, Rawat said.

The analyst said the allegations are hard to prove or disprove and more work is needed to dive into the claims.

The key issue we will assess is whether Blocks policies are/were significantly different vs. peers.

The analyst said that they are less concerned about fake and duplicate users, something not uncommon in the sector, noting PayPal Holdings PYPL as an example.

The two big questions for Faucette are how widespread is the alleged fraudulent issue with Cash App and does the current general banking environment lead to a faster regulatory review/interruption of business that would likely have eventually happened anyway.

The analyst said one big question could also be how big the impact to revenue is if any issues with Cash App need to be resolved.

Weve previously discussed how Cash App seems to have lower verification requirements that potentially may not meet all standards of Know Your Client and Anti-Money Laundering rules, Faucette said.

The analyst said investors in Block should be prepared for lower growth and monetization for Cash App.

Kwok said the biggest issue from the short report is if Cash App user metrics are overstated and if Block is enabling criminal and fraudulent activity.

While some of the things in the report seem to be taken out of proportion, the key question is whether the company is making revenues/profits on fraudulent accounts and how robust its compliance practices are, Kwok said.

Gabriele said the claims that Block is a fraudulent business are likely incredibly low, but it is hard to prove or disprove the allegations.

Putting fraud aside, parts of the Hindenburg report actually echo our downgrade note in particular, growth longevity in Cash App and EBITDA valuation vs. peers, Gabriele said.

The analyst downgraded shares to Perform in January and remains on the sidelines for the stock.

Beck said the user metrics used by Block and Cash App are consistent with peers and third-party data sources.

We see no merit to the disparaging claims and rather view the report as observations from a relatively novice industry outsider who is not familiar with standard operating practices and principles within the FinTech industry or the broader regulatory construct, Beck said.

Block Inc issued its own response to the allegations from Hindenburg on Thursday.

SQ Price Action: Block shares are down 3% to $59.85 on Friday.

Read Next: Cathie Wood Shrugs Off Hindenburg Attack On Jack Dorsey's Block With $21M Stock Buy

Photo: Shutterstock

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Sports

Sovereignty rallies to win Jim Dandy at Saratoga

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Sovereignty rallies to win Jim Dandy at Saratoga

SARATOGA SPRINGS, N.Y. — Kentucky Derby and Belmont Stakes champion Sovereignty rallied after losing position heading into the final turn to win the $500,000 Jim Dandy by a length at Saratoga on Saturday.

Ridden by Junior Alvarado, Sovereignty ran nine furlongs in 1:49.52 and paid $3 to win as the 1-2 favorite against four rivals, the smallest field of his career.

Hall of Fame trainer Bill Mott said Sovereignty would be pointed toward the $1.25 million Travers on Aug. 23 at the upstate New York track.

Approaching the turn, there were a few tense moments as it appeared Sovereignty was retreating when losing position to the advancing Baeza and deep closers Sandman and Hill Road, leaving Sovereignty in last for a few strides.

Alvarado said he never had a doubt that Sovereignty would come up with his expected run.

“It was everybody else moving and at that time I was just like, ‘Alright let me now kind of start picking it up,'” Alvarado said. “I had 100% confidence. I knew what I had underneath me.”

Baeza, third to Sovereignty in both the Derby and Belmont, finished second. Hill Road was another 9¼ lengths back in third. Mo Plex was fourth and Sandman fifth.

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UK

Man suffers cardiac arrest onboard boat trying to reach UK

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Man suffers cardiac arrest onboard boat trying to reach UK

A man has died after suffering cardiac arrest onboard a boat attempting to reach the UK.

The vessel turned back towards Equihen beach on the French coast yesterday morning.

A nurse tried to resuscitate the man but was unsuccessful.

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Pic: PA

French authorities have now launched an investigation into the circumstances.

A spokesperson for Doctors Without Borders, also known as MSF, has criticised authorities on both sides of the Channel.

Jacob Burns said: “Yet again we have a tragedy in the Channel, that is the consequence of the deadly, costly and ineffective security policies implemented by the UK and France.”

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Pic: PA

Later on Saturday, a lifeboat carried migrants who have made the voyage into the Port of Dover.

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Photographs showed them huddled under blankets and orange life jackets on board.

Read more from Sky News:
Israel resumes airdrops into Gaza
11 stabbed at US supermarket

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Protesters clash over asylum hotels

Provisional statistics from the Home Office suggest almost 24,000 people have arrived on small boats in the UK so far this year.

Towns and cities across the UK have seen protests in recent days, primarily outside hotels believed to be housing asylum seekers.

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US

Michigan: 11 people stabbed in US supermarket – with six in critical condition

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Michigan: 11 people stabbed in US supermarket - with six in critical condition

At least 11 people have been stabbed at a Walmart supermarket in Michigan, with six in a critical condition.

Officials say a suspect is in custody – and at this stage, it is believed the attack was a “random act” that involved a folding-style knife near the checkout area.

Sheriff Michael Shea told reporters: “Eleven is 11 too many, but thank God it wasn’t more.”

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Pic: AP

The suspect, who is from Michigan, is not known to police – and was captured within three minutes thanks to “citizen involvement”.

The attack unfolded in Traverse City – and Tiffany DeFell, who was in the car park at the time, described scenes of chaos.

“It was really scary. Me and my sister were just freaking out,” she said. “This is something you see out of the movies.”

Beyond the six people in a critical condition, it is believed the remaining five were seriously hurt. All 11 are still being treated in hospital.

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Pic: AP

Michigan Governor Gretchen Whitmer said: “Our thoughts are with the victims and the community reeling from this brutal act of violence.”

A Walmart spokesperson added that the retailer is working closely with law enforcement.

“Violence like this is unacceptable. Our thoughts are with those who were injured and we’re thankful for the swift action of first responders,” a statement said.

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Pic: AP

At this stage, the ages of the victims is unclear – but it is not thought any of the victims were Walmart employees.

Traverse City is about 255 miles northwest of Detroit.

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