Could the market be overstating the problems at H&R Block?
H&R Block shares gave up fifteen percent of their value after the company released an 8-K on October 18th with details about HSBC's resistance to honoring the contract between the two companies to facilitate refund anticipation loans. The all-knowing "Market" seems to have been on to the situation even earlier, as
the shares had dropped another 15 percent in the prior week.
This is a big drop for a company facing the loss of a product that contributes only 4.9 percent of revenue.
One unstated cost for Block is the ongoing impact that refund anticipation loans pose to their reputation. In 2005, two academics and a Block AVP published a case study on Block's RALs. They asserted that costs from "non-consumers" threaten the entire model.