Block ($SQ) Plunges After Short Seller Report 📉

Shares of the fintech giant Block ($SQ) tumbled over 15% after short-seller Hindenburg Research released a report accusing Block of inflated user metrics and a ‘wild-west’ approach to compliance that facilitates fraud and criminal activity.

Hindenburg is a forensic financial research firm with a track record for finding corporate wrongdoings and shorting the companies before releasing high-profile reports. Hindenburg is best known for its bet against electric truck maker Nikola Corp, which was found to be deceiving investors about its technological progress.

After a two-year investigation, Hindenburg has now put Block in the crosshair. Block owns many familiar fintech products, including Square, Cash App, Weebly, Afterpay, and Tidal.

Here’s a sample of the most damning claims in the Hindenburg report 🤯:

• Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or tied to a single individual.

• Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user.

• Cash App was cited as “by far” the top app used in U.S. sex trafficking, according to a leading non-profit, including the trafficking of minors.

In response to the accusations, Block dismissed the report as "factually inaccurate and misleading," stated its intention to work with the SEC, and said it would explore legal action against Hindenburg.

Algonquin’s $2.6B Acquisition of Kentucky Power Unlikely🚨

According to analysts, Algonquin Power's $2.6 billion deal to buy Kentucky Power is unlikely to materialize.

Algonquin Power ($AQN) is a Canadian renewable energy and utility conglomerate with a $17 billion portfolio in North America. In 2021, they announced a deal to acquire American Electric Power's (AEP) Kentucky operations to expand AQN’s footprint in the US.

Many analysts think the deal falling through could be good news for Algonquin, which has seen its stock fall 37% in the last 6 months 📉.

As a refresher, here are the key events that have led to the popular dividend stock’s fall from grace:

• 📅 Nov 11, 2022 - Algonquin Power reports a $195M Q3 loss and cuts its financial guidance, blaming higher interest rates and inflation. The stock falls 30% in one week to a six-year low as investors worry whether its 8.7% dividend is still sustainable.

• 📅 Nov/Dec 2022 - The stock continues to fall another 17% over the rest of November/December to a low of $8.82, with analysts turning on the company (i.e. RBC Capital Markets droppd AQN from their ‘global energy best ideas’ list).

• 📅 Dec 15, 2022 - The U.S. Federal Energy Regulatory Commission blocked Algonquin's acquisition of Kentucky Power, citing the risk of consumers being hit with higher rates.

• 📅 Jan 12, 2023 - As feared in November, AQN slashes its quarterly dividend by 40% blaming rising borrowing costs.

• 📅 Feb 14, 2023 - In response to the US government blocking the deal, AQN submitted a new application. If the deal is not closed by April 26, either party may terminate the transaction.

Since January, AQN has rallied 20%, recovering about a third of the losses since Nov 11. Now, investor attention is focused on the outcome of the acquisition deal 😰

Despite a $65M termination fee, the market prefers that AQN doesn’t proceed with the transaction, with Nelson Ng from RBC Dominion Securities saying that AQN will have “plenty of opportunities to deploy capital” and will be in a “stronger position with less pressure to sell assets” if the deal falls through.

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🗞️ What else you might’ve missed:

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• Canadian inflation slows down in February.

• Ford expects to lose $3B on their EVs this year.

• Coinbase receives warnings from SEC.

• Microsoft releases Copilot X for programmers.

• Shake Shack is expanding to Canada in 2024.

• Amazon lays off another 9,000 employees.