Who Is Jack Dorsey: The Block Inc Founder Who Is Hindenburg’s New Target 

After having caused a market rout against Adani Group, US-based short-seller Hindenburg Research has now come up with a new investigative report. This time, the research firm has targetted Block Inc, parent company of payment platform Cash App. Block Inc was founded by Jack Dorsey and Jim McKelvey in 2009. Dorsey is also the co-founder and former chief executive officer (CEO) of micro-blogging site Twitter.   

In its report, Hindenburg has levelled several serious charges against Block Inc and its top management including Dorsey, who is presently principal executive officer and chairperson of Block. Dorsey, who tweets under the handle @jack, was widely seen as the face of Twitter, before the social media site was taken over by billionaire Elon Musk. 

Dorsey’s Twitter Career 

Having co-founded Twitter in 2006 with Evan Williams, Biz Stone and Noah Glass, Dorsey was the CEO of the firm until 2008. That year, after his relationship with Evan Williams turned sour, Dorsey stepped down from the CEO position and took over as chairperson of the company’s board. Williams then became the new CEO of Twitter. It was reported that although many in the board wanted Dorsey to leave altogether, he got to remain in the board since he was the company’s co-founder.  

In 2011, he came back to Twitter as its executive chairman, as Williams was no longer the CEO after being replaced by Dick Costolo. When Costolo left, Dorsey was brought back as interim CEO and eventually became the permanent head in 2015. In November 2016, Dorsey’s own Twitter account was subject to a hilarious episode when it got suspended. The CEO himself ended up admitting that it was a result of an internal mistake. 

This was not the only time when Dorsey’s Twitter account was involved in such mishaps. In 2019, a hacker group named ‘Chuckling Squad’ got access to Dorsey’s account after the number linked to his Twitter was compromised. For about 15 minutes while the hackers had access to the account, a series of racist and inappropriate tweets were published under Dorsey’s name. Owning up to a security failure, Twitter then said in a statement, “This allowed an unauthorised person to compose and send tweets via text message from the phone number. That issue is now resolved.” 

By the time Twitter was involved in drama involving Elon Musk’s takeover, Dorsey had left the company he co-founded. He announced his resignation from Twitter's top position in November 2021 and paved the way for Indian-origin Parag Agrawal to take over until Musk eventually bought Twitter. Dorsey, however, maintained his minority stake in the micro-blogging site even when Musk took over Twitter. 

What Hindenburg Says 

In its earliest mention of Dorsey in report that came out on Thursday, Hindenburg points out an alleged mistake in Dorsey’s claims about Cash App’s mainstream popularity. While Dorsey had previously cited the mentioning of Cash App in various hip-hop songs as measure of its popularity, Hindenburg said in its report that the app is mainly represented in pop media as a means to commit scam, drug trafficking and payment for murders. 

One of Hindenburg’s most serious allegations against Dorsey is that he was involved in insider trading of Block’s share during the pandemic. Block’s co-founder James McKelvey and its chief financial officer Amrita Ahuja and Cash App’s lead manager Brian Grassadonia also took part in this illicit practice, the short-seller said. While Dorsey and McKelvey collectively sold over $1 billion worth of Block shares, the shares sold by others amount to a few million dollars, as per the report. Interestingly, Block’s shares made an impressive bull run during the pandemic, having touched a high of $276 by 15 February 2021 after trading at $32 in March 2020 at the onset of the pandemic. 

In its report, Hindenburg says, “According to our analysis, between March 1, 2020, and December 31, 2021, Block CEO Jack Dorsey sold approximately $574.3 million in stock, at prices as high as $277.51 per share. Block co-founder and director James McKelvey sold about $468.2 million in stock over the same period, at prices as high as $261.38 per share in August 2021.” 

Another accusation from Hindenburg’s end is that Jack Dorsey takes undue advantage of the marginalised demographics that the Cash App supposedly serves. When Cares Act came into effect in the US, Dorsey tweeted that Block will help in the distribution of government money in a quick manner. This resulted in around 11 million people activating the direct deposit feature on their Cash App accounts or creating new deposit accounts in the platform within a few weeks of Dorsey’s tweet, Hindenburg notes. However, the short-seller says that the cost of increasing the transaction speed was passed on to the users, causing annual percentage rate (APR) of more than 200 per cent. 

Hindenburg also makes a remark about Dorsey’s current appearance at the conclusion of the report. The former Twitter CEO present-day attire mainly consists of tie-dye t-shirts and a guru beard, which Hindenburg terms as an “effective modern marketing approach”. This results in Dorsey being celebrated by people from all walks of life, who are not aware of the predatory practices, regulatory violations and illicit insider trading at the firm that Dorsey helms, the short-seller seems to suggest. 

If pre-market trade is anything to go by, Hindenburg’s new target might face a market rout the same way that Gautam Adani’s conglomerate did. If that is indeed the case, then there will be increased scrutiny over Dorsey and Block Inc as well. As Adani seems to recoup some of the massive losses he made over the past two months, coming weeks will give us an idea of how much Jack Dorsey stands to lose in the face of Hindenburg’s searing report.