Federal prosecutors are investigating financial transactions within Square parent Block, including Cash App and bitcoin, in response to concerns raised about potential compliance lapses within the company. The news of the investigation led to a significant drop in Square’s stock price the day before the release of the company’s first-quarter earnings report. This decline represented a 13% decrease in the stock’s value for the year.
In a report by NBC news, it was revealed that prosecutors are discussing alleged compliance issues with a former employee, particularly related to the failure to report various transactions involving credit cards, dollar transfers, and bitcoin to governmental authorities. Square’s core business model involves operating a digital payments ecosystem that serves both merchant sellers and consumer buyers.
Short-seller Hindenburg Research had previously accused Block of inflating Cash App user metrics and enabling fraudulent activities. The upcoming first-quarter earnings report for Square stock, set to be released after the market closes on Thursday, is highly anticipated. Analysts are predicting an 80% increase in adjusted profit and a 17% increase in revenue, which is expected to be driven by Cash App transactions.
Key performance metrics such as gross profit and earnings before interest, taxes, depreciation, and amortization (EBITDA) are closely monitored by Wall Street analysts. Projections indicate gross profit of $2.02 billion and EBITDA of $591 million. Despite the investigation and concerns about compliance issues, Square stock remains below its 50-day moving average and has an entry point of 80.29 from a cup base. Market watchers are advised to follow developments related to Square stock, particularly in light of the ongoing investigation and upcoming earnings report.