Block hit by market turmoil and Afterpay indigestion

Block's market value is dropping steadily, cut in half since April.

Behind the scenes: A lot of fintechs are suffering the same. But what's unique about Block's rout is that it comes as it's not only being slammed by a market storm, but digesting the $27 billion purchase of Afterpay.

• Integrating Afterpay and plugging the buy-now-pay-later into Block's system is critical to the success of both the deal and the combined company.
• The value of the stock deal was $29 billion at announcement in August, and closed at a value of $27 billion early this year.

Of note: Block's (formerly Square) market value when it inked the Afterpay deal was around $120 billion. It's now just above $30 billion, or darn close to the value of the entire Afterpay purchase.

• Investors are keenly aware of that fact, and so, apparently, is activist hedge fund titan Dan Loeb. Research firm Gordon Haskett pointed out in a note that Loeb, in a tweet reply, made mention of that stark value drop by Block.
• A person familiar with the matter pointed out that Block's ability to parse through Afterpay's loans and move from one balance sheet to another is a much more arduous process than anticipated.
• Rising interest rates are also playing a role in the indigestion, the person said.

The bottom line: If Block isn't able to pull off this integration faster, and build its market value back up, it, too, may be the target of a well-capitalized suitor. At the very least, it may have to contend with the kind of activist investor ire that Third Point's Loeb is already hinting at.

• That said, an entity seeking to shake things up at Block needs to get past Jack Dorsey's majority ownership of the company.