Short-Seller Hindenburg Claims Cash App Is Built on Fraud

Short-seller Hindenburg Research released a report detailing its claims that Block is materially overvalued. The report makes a number of claims, but in our view the primary claim is that the Cash App business has been built largely through fraud. We have reviewed Hindenburg's claims and find them largely anecdotal. That said, we would reiterate our Very High Morningstar Uncertainty Rating for Block. One of the key drivers of that uncertainty is the Cash App business. We think the long-term economics of this business are very difficult to predict, and that a significant factor is that the regulatory framework for the P2P space is far from settled. Some of the issues raised by Hindenburg could prompt a regulatory response. We will maintain our $104 fair value estimate and narrow-moat rating.