Shares in Square-parent Block (SQ) plunged Thursday after Hindenburg Research disclosed a short position in SQ stock while claiming that the company inflates Cash App user metrics and facilitates fraud.
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Square stock was down 10.9% to 64.72 in morning trades after falling as much as 19% on the stock market today. The loss wiped most of the 2023 gains of SQ stock. Block stock had gained 17% in 2023 prior to the disclosure by Hindenburg. The digital payment firm’s officials had yet to respond to requests for comment.
In its core businesses, Square stock aims to build a two-sided digital payments ecosystem, with products designed for both merchant sellers and consumer buyers. The Square Cash App helps individuals manage money, buy stocks and cryptocurrency, and more.
In a news release, Hindenburg says the company has “systematically taken advantage of the demographics it claims to be helping.”
The release went on to say: “Most analysts are excited about the post-pandemic surge of Block’s Cash App platform, with expectations that its 51 million monthly transacting active users and low customer acquisition costs will drive high margin growth and serve as a future platform to offer new products.”
But Hindenburg Research added that “Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.”
SQ Stock Relative Strength
Square focuses on software products that can be used across many industries, such as invoicing, payroll and marketing. It also aims to integrate its payment tools into e-commerce platforms.
Square’s Relative Strength Rating stands at 81 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an 80 or better RS Rating.
SQ stock, meanwhile, has an Accumulation/Distribution Rating of D+. The rating runs from a best-possible A+ to a worst-possible E. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
As of March 23, SQ stock has no valid entry point. Square stock needs to form a new base to be actionable.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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