The recent report by Hindenburg Research accusing payments company Block Inc. of ignoring widespread fraud has resulted in a significant drop in co-founder Jack Dorsey’s net worth.
The report alleges that Block inflated user metrics and claims that the stock has downside potential of 65% to 75% based on fundamental factors. Block has denied the allegations and plans to explore legal action against the short-seller.
The negative impact of the report is reflected in the stock’s performance, with Block falling as much as 22% on Thursday and closing down 15%. Dorsey’s personal fortune, which is largely tied up in Block, also took a hit, with a $526 million decline in his net worth on Thursday, marking his worst single-day decline since May.
Jack Dorsey’s net worth is now estimated to be worth $4.4 billion according to the Bloomberg Billionaires Index.
Hindenburg’s report on Block Inc. and Jack Dorsey’s net worth
It’s worth noting that Hindenburg has a history of targeting high-profile billionaires and causing their fortunes to fall. In this case, Dorsey’s wealth is largely tied to his stake in Block, which is valued at $3 billion, compared to his position in Twitter, valued at $388 million.
The allegations made by Hindenburg and the resulting impact on Block’s stock price and Dorsey’s net worth are likely to continue to be closely monitored by investors and analysts alike.
Hindenburg Research previously conducted an inquiry into the Indian businessman Gautam Adani and his business conglomerate, which resulted in a substantial drop in the stock prices of his companies and a significant decrease in his net worth, once ranked as the world’s second-richest person.
Currently, Adani is placed 21st on the Bloomberg Billionaires Index with a fortune of $60.1 billion. Furthermore, Hindenburg also took aim at electric car manufacturer Nikola Corp in September 2020, which led to a drop in the company’s stock value and an investigation that eventually resulted in a fraud conviction against the company’s founder Trevor Milton in October.
Although, it is difficult to predict the exact impact of the Hindenburg report on the US market as it depends on a variety of factors such as the overall market sentiment, investor confidence, and the extent to which the allegations in the report are perceived to be credible.
However, the report has already had a significant impact on Block’s share price, which fell as much as 22% on the day the report was released. Additionally, short sellers have reportedly made over $400 million in paper profit due to the 20% price drop following the report.
The fact that Block is a well-known and high-profile company, co-founded by Jack Dorsey, also adds to the potential impact on the broader market as it could lead to increased scrutiny of other companies in the fintech and payments space. Ultimately, only time will tell how the market reacts to this news and whether it has any wider implications beyond Block itself.