Adani Group shares jumped by up to 9% on Thursday following the report of the closing down of Hindenburg Research, the US investment firm known for its short-selling activities.
Adani Power shares rose 9% to the day's high of Rs 599.90 on BSE, Adani Green Energy jumped 8.8% to Rs 1,126.80. Adani Enterprises rose 7.7%, reaching Rs 2,569.85, while Adani Total Gas saw substantial gains, climbing 7% to Rs 708.45.
Nathan (Nate) Anderson's Hindenburg Research. The firm gained fame for allegations against the Adani Group, which include stock manipulation and accounting fraud.
Anderson, the founder of Hindenburg Research, announced plans to shut down the US-based investment research firm, which gained attention for its short-selling activities and reports that led to the loss of billions of dollars for Indian billionaire Gautam Adani-led Adani Group.
Hindenburg Research's founder said he would disband the firm whose reports sparked heavy selling by investors and investigations by authorities, wiping billions from the market values of companies including India's Adani Group and U.S.-based Nikola.
Hindenburg has said it looked for "man-made disasters," such as accounting irregularities, mismanagement, and undisclosed related-party transactions.
One of Hindenburg's most controversial reports was a bet against Indian conglomerate Adani Group in 2023 that led to more than $100 billion in value being wiped off the group's shares.
The short-seller accused Adani Group of using offshore tax havens improperly, which the company denied.
U.S. prosecutors announced in November last that Gautam Adani, one of the world's richest people, had been indicted in New York over his role in an alleged multibillion-dollar bribery and fraud scheme.
Anderson, who started Hindenburg in 2017, cited the toll of the "rather intense, and at times, all-encompassing" nature of the work as the reason for his decision, in a website post published on Wednesday. He said there was no specific reason for his decision; "no particular threat, no health issue, and no big personal issue."
"The plan has been to wind up after we finished the pipeline of ideas we were working on," he said. "That day is today."
Anderson, who managed his firm's own money but not that of others, bet against companies they believe have accounting issues, mismanagement, or fraud, which he found usually after a long period of investigation.
Short-selling involves borrowing a stock to sell it in the expectation the price will fall, then repurchasing the shares and pocketing the difference. Should the price rise, the seller can be exposed to potentially unlimited losses.
In 2023, another famous short-seller decided to shut down his firm. Jim Chanos, best known for his bets against energy trader Enron many months before the company's December 2001 bankruptcy amid an accounting scandal, closed his hedge fund, saying its business model had come under pressure.
After finding potential wrongdoing, Hindenburg published a public report explaining the case and bet against the target company, hoping to make a profit. Other investors would often make their own trades based on Hindenburg's research.
Hindenburg also went after electric truck maker Nikola in 2020, in one of its best-known shorts.
The short-seller said Nikola deceived investors about its technological developments. A U.S. jury convicted Nikola's founder Trevor Milton of fraud in 2022 over allegations he lied to investors. In 2023, the firm shorted Carl Icahn's Icahn Enterprises.
"We shook some empires that we felt needed shaking," Anderson wrote, adding nearly 100 people had been charged by regulators "at least in part" because of Hindenburg's work.
Here's the timeline of Hindenberg's reports on Adani Group:
January 2023: The Hindenburg Research released its original report on January 24, 2023, against the Adani Group, titled ‘Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History’.
The report alleged that the conglomerate was “engaged in a brazen stock manipulation and accounting fraud scheme over decades”. Hindenburg also accused the Adani family members of creating offshore shell companies in tax havens such as Mauritius, the UAE, and the Caribbean Islands, using forged import-export documentation to show fake revenue, and laundering money from their listed public companies, per the report. However, the conglomerate denied all the allegations.
August 2024: The second round of Hindenburg allegations came on August 10, 2024 against the Securities and Exchange Board of India (SEBI) chairperson, Madhabi Puri Buch. The report claimed that Buch has a conflict of interest. It claimed that the market regulator had been “reluctant” to act on its January 2023 Adani report due to alleged investments of SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval Buch, in offshore funds connected to the Adani Group.
Hindenburg alleged that Madhabi Puri Buch and Dhaval Buch had invested in IPE Plus Fund 1, a Mauritius-registered fund, and Global Dynamic Opportunities Fund, a Bermuda-based fund. The company controlled by Vinod Adani, the elder brother of Gautam Adani, had invested in the Global Dynamic Opportunities Fund, which then invested in IPE Plus Fund 1, whose founder and chief investment officer was Anil Ahuja, who had served as a director of Adani Enterprises. Madhabi Puri Buch and Dhaval Buch denied all the allegations the US-based short seller made.
September 2024: On September 12, Hindenburg Research charged in a social media post that Swiss authorities have frozen more than $310 million in funds across several Swiss Bank accounts linked to the money laundering and securities investigation of Adani Group.
“Swiss authorities have frozen more than $310 million in funds across multiple Swiss bank accounts as part of a money laundering and securities forgery investigation into Adani, dating back as early as 2021,” the short seller posted on X. In its post, Hindenburg cited a Swiss media outlet, Gotham City, claiming that an order from the Federal Criminal Court (FCC) revealed that the Geneva Public Prosecutor's office was investigating the alleged wrongdoing of the Adani Group conglomerate “well before activist investors from Hindenburg Research made its first accusations.”
(By arrangement with livemint.com)
