From Twitter to Square: The Fascinating Journey of Jack Dorsey After Transitioning to Web3
Welcome to the second edition of The Block Party: No Math Required!
On November of 2021, Jack Dorsey, the founder of both Twitter and payments company Square, announced that he would be stepping down as CEO of Twitter and dedicating himself to creating the future of blockchain. At the time, Bitcoin prices were at an all-time high and the, “crypto buzz”, was in full effect.
However, now that the bear market has drastically impacted Web3, where has Jack Dorsey been and what is he up to?
In this edition, we will be diving into Jack’s pivot into the blockchain world and what he has been working on since leaving the spotlight of Twitter.
What is Square/Block?
In 2009, Jack Dorsey co-founded Square, a financial technology company that provides payment and merchant services. Originally starting out as a small mobile payment platform, Square has since expanded its offerings to include a suite of tools for small businesses, including point-of-sale systems, payroll management, and capital financing. In 2015, he became the CEO of Square while also maintaining his role at Twitter, however, balancing both companies became a hinderance. After leaving Twitter, Jack was able to dedicate his full time to Square and work to capitalize on a growing financial technology industry.
On December 1st, 2021, Square announced a rebranding project, which included changing their official name to Block. In large part, this was to emphasize their desire to re-focus the company’s direction and enter the blockchain and crypto markets.
On May 18th, 2022, Block held its first Investor Day since 2017. CFO Amrita Ahuja and CEO Jack Dorsey announced major plans for Block, which were largely centered around the idea of rebranding Block away from simply being a digital payment platform, but rather, a multi-dimensional organization with numerous unique ventures. Block’s impressive portfolio includes:
Cash App - financial platform to send, receive, and invest money ($2.95B in Gross Profit)
TIDAL - subscription-based music streaming platform (~$300M valuation)
Spiral - build and fund projects that will make Bitcoin become a global currency
TBD - open developer platform for Bitcoin and other chains
When CFO Amrita Ahuja was being interviewed by CNBC, he stated, “Calling Block a payments company is like calling Amazon a bookseller”, (Rooney, CNBC). Stakeholders can appreciate the confidence from Block, however, can Block’s rebranding really propel them into the spotlight of a massively competitive tech industry? Furthermore, given the state of the industry, are they capable of battling this crypto winter?
Evaluating the Future of Block in 2023: One Step Forward, One Step Back
In May of 2022, Block held its first investor day in 5 years, which had a major emphasis on the company’s re-branding and future plans. “Forward-looking plans”, was the key-word of the over 5 hour presentation from various team leads, Block executives, and even parts featuring Mr. Dorsey himself, with all speakers emphasizing a new and improved vision and market opportunity for Block Inc. Each, “ecosystem”, under Block had the chance to give current updates and glimpses into the future.
The core theme of Investor Day was Block’s expansion beyond their fundamental business of digital payments and journeying into various ventures, including cryptocurrency, NFTs, and DEFI.
Block also utilized this time to show off new business initiatives centered around the idea of leveraging blockchain technology to make transactions faster, cheaper, and safer across numerous industries. Having a peer-to-peer payment service mega-giant like Cash App under their toolbelt allows for the integration of these initiatives to have direct access to a huge consumer pool. As a result, these forward-looking plans have the potential to secure an advantage over direct competitors, such as Venmo or Zelle.
Despite the financial turmoil caused by the pandemic to many industries, Block showed-off their steady growth in revenue and user adoption over the 5 years since their last investor day. The company reported $1.5 billion in revenue for 2021, which is a $1 billion increase since 2017. Block also boasted a 100 million increase in registered users across all of its platforms.
These impressive metrics and ambitious plans presented by Block Inc. during the event reignited the buzz surrounding the company, and cemented Jack Dorsey’s reputation as a tech startup wunderkind.
However, this momentum was short-lived, as currently Block is being investigated by Hindenburg Research. Essentially, Hindenburg Research is a “financial watchdog” that investigates and exposes fraud or unethical practices in the industry. Their 2-year investigation led to a published report accusing Block of inflating their consumer metrics and financial statements. Their main findings, which caused Block’s stock to drop 15%, were:
Cash App is being utilized for financial schemes and fraud, (specifically with unemployment benefits during the pandemic)
Cash App is a hub for criminal transactions like buying and selling of narcotics, sex trafficking, and gang activity
A considerable amount of “active users” are actually bot accounts
It’s worth mentioning that Hindenburg leverages their investigative reports to engage in activist-driven short selling. Essentially, they capitalize on the stock price manipulation that occurs once their report is made public to make a profit.
Don’t understand the concept of short selling? Here is a super simple diagram that explains the basics of shorting a stock. Let’s say, for example, that you think the price of a Jolly Rancher is going to go down soon. Here is what a short of a Jolly Rancher would look like:
From Hindenburg Research’s perspective, they utilize their reports on unethical or fraudulent behaviors of a business to tank a company’s stock price, allowing them to capitalize on their short.
Block immediately attempted to put out the fire by issuing a public statement, calling the report misleading and inaccurate. They also are seeking legal action against Hindenburg for damages caused by the report.
With this drastic set-back, the future of Block remains uncertain. On the one hand, Block has demonstrated impressive growth in a slowing blockchain industry and seems to have ambitious, but attainable goals for the future. Not to mention, recent partnerships with Visa and PayPal brings validation to their forward-looking plans, suggesting a bright future ahead. On the other hand, this Hindenburg investigation questions their creditability and ethics, resulting in shaky confidence from their stakeholders. Block will need a massive response to Hindenburg in order to restore their positive momentum and regain investors’ trust.
Overall, the future of Block will depend on its ability to navigate these tribulations and deliver value to its users and shareholders. There is no doubt to the promising look of Block’s ecosystems, however, Hindenburg’s investigation has the potential to steal the spotlight and start an un-preventable downfall. One thing is for certain: the coming year will be a crucial one for Block and Jack Dorsey.
And just like that, you have finished the 2nd edition of The Block Party!
Thank you for reading this article and procrastinating final exam studying!
We got some more articles cooking up, so see you next week…
Until then, enjoy life and touch some grass