Short attack on Afterpay parent

SHARES in Afterpay parent company Block tumbled more than 20 per cent on the ASX after an attack by short-seller Hindenburg Research, which claimed the company inflated its user numbers and helped facilitate fraud.

In a report released on Friday (AEDT), which it said followed a two-year investigation, Hindenburg Research claimed Block’s internal systems took a “Wild West” approach to compliance, and that former employees estimated that between 40 per cent and 75 per cent of accounts on the Block platform were either fake or involved in fraud.

Hindenburg, which revealed a short position in the Jack Dorsey-led payments outfit, recently launched a similar attack on Indian mining giant Adani, which wiped $US100bn from that company’s valuation.

Block securities listed on the ASX tumbled more than 20 per cent in early afternoon trading – hitting a four-month low – before recovering slightly to close down 18.4 per cent to $89.03, following a 15 per cent slide on Wall Street overnight.

Hindenburg said it spoke with multiple former workers at Block who claimed that their concerns were ignored despite “criminal activity and fraud running rampant on its platform”.

It also said the company’s Cash App had far less actual users than claimed, given its metrics were “filled with fake and duplicate accounts”.

The company is dual-listed on the ASX and the New York Stock Exchange. The net worth of billionaire chief executive Jack Dorsey plunged by $US526m – some 11 per cent – his worst decline since May last year.

The company’s shares were already down 60 per cent last year amid a tech downturn and tightened e-commerce spending.