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.
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Canada’s new prime minister, Mark Carney, once said recreating a virtual global gold standard like Bitcoin “would be a criminal act of monetary amnesia.”
AVONDALE, Ariz. — Christopher Bell became the first NASCAR Cup Series driver to win three straight races in the NextGen car, holding off Joe Gibbs Racing teammate Denny Hamlin by 0.049 seconds to win the second-closest race in Phoenix Raceway history Sunday.
Bell started 11th in the 312-mile race after winning at Atlanta and Circuit of America the previous two weeks. The JGR driver took the lead out of the pits on a caution and stayed out front on two late restarts to become the first driver to win three straight races since Kyle Larson in 2021.
The second restart led to some tense moments between Bell and Hamlin — enough to make their team owner feel a bit queasy.
“I was ready to upchuck,” JGR Racing owner Joe Gibbs said.
Bell became the fourth driver in Cup Series history to win three times in the first four races — and the first since Kevin Harvick in 2018. The last Cup Series driver to win four straight races was Jimmie Johnson in 2007.
“We’ve had four races this year, put ourselves in position in all four and managed to win three, which is a pretty remarkable batting average — something that will be hard to maintain, I believe,” Bell’s crew chief Adam Stevens said.
The Phoenix race was the first since Richmond last year to give teams two sets of option tires. The option red tires have much better grip, but start to fall off after about 35 laps, creating an added strategic element.
A handful of racers went to the red tires early — Joey Logano and Ryan Preece among them — and it paid off with runs to the lead before they fell back.
Bell was among those who had a set of red tires left for the final stretch and used it to his advantage, pulling away from Hamlin on a restart with 17 laps left.
Hamlin pulled alongside Bell over the final two laps after the last restart and the two bumped a couple of times before rounding into the final two turns. Bell barely stayed ahead of Hamlin, crossing the checkered flag with a wobble for his 12th career Cup Series win. He led 105 laps.
“It worked out about as opposite as I could have drawn it up in my head,” Bell said. “But the races that are contested like that, looking back, are the ones that mean the most to you.”
Said Hamlin: “I kind of had position on the 20, but I knew he was going to ship it in there. We just kind of ran out of race track there.”
Katherine Legge, who became the first woman to race on the Cup Series since Danica Patrick at the Daytona 500 seven years ago, didn’t get off to a great start and finished 30th.
Fighting a tight car, Legge got loose coming out of Turn 2 and spun her No. 78 Chevrolet, forcing her to make a pit stop. She dropped to the back of the field and had a hard time making up ground before bumping another car and spinning again on Lap 215, taking out Daniel Suarez with her.
“We made some changes to the car overnight and they were awful,” Legge said. “I was just hanging on to it.”
Logano, who started on the front row in his first race at Phoenix Raceway since capturing his third Cup Series at the track last fall, fell to the back of the field after a mistake on an early restart.
Trying to get a jump on Byron, Logano barely dipped his No. 22 Ford below the yellow line at the start/finish. NASCAR officials reviewed the restart and forced the Team Penske driver to take a pass through on pit road as the entire field passed him on the track.
“No way,” Logano said on his radio. “That’s freakin’ ridiculous.”
Logano twice surged to the lead after switching to the red tires, but started falling back on the primary tires following a restart. He finished 13th.
Preece took an early gamble by going to the red option tires and it paid off with a run from 33rd to third. The RFK Racing driver dropped back as the tires wore off, but went red again following a caution with about 90 laps left and surged into the lead.
Preece went back to the primary tires with 42 laps to go and started dropping back, finishing 15th.
The series heads to Las Vegas Motor Speedway next weekend.
Bitcoin fell on Monday as volatility in the price of the world’s largest cryptocurrency continues following an executive order signed by President Donald Trump to create a strategic bitcoin reserve for the United States.
Bitcoin was trading at $81,712, down over 5% but off earlier lows, at 9:42 a.m. Singapore time, according to Coin Metrics.
The reserve will be funded by coins that have been seized in criminal and civil forfeiture cases and there are no plans for the U.S. government to buy more bitcoin. After the strategic reserve announcement last Thursday, crypto prices declined as investors were disappointed it wasn’t a more aggressive program.
Other cryptocurrency prices also dropped on Monday. Both ether and XRP were down about 7.5% at around 9:43 a.m. Singapore time.
Some investors, however, said the move to establish a reserve was bullish in the long-term.
“I absolutely think the market has this wrong,” Matt Hougan, chief investment officer at Bitwise Asset Management, told CNBC’s “Squawk Box Asia” on Monday. “The market is short-term disappointed” that the government didn’t say it was immediately going to start acquiring 100,000 or 200,000 bitcoin, he added.
Hougan pointed towards comments on X from White House Crypto and AI Czar David Sacks, who said the U.S. would look for “budget-neutral strategies for acquiring additional bitcoin, provided that those strategies have no incremental costs on American taxpayers.”
“I think the right question to ask is: did this executive order make it more likely that in the future, bitcoin will be a geopolitically important currency or asset? Will other governments look to follow the U.S.’s lead and build their own strategic reserve? And to me, the answer to that is emphatically yes,” Hougan said.
“The reason that questions matters is that’s the question that determines if bitcoin is $80,000 a coin or $1 million a coin.”
Hougan called the decline in crypto prices a “short-term setback.”
“I think the market will soon find its footing and realize that actually this is incredibly bullish long term for this asset and for crypto as a whole,” he said.
