What You Need To Know
In a David versus Goliath battle, a small New York short seller is taking on one of Asia’s richest people. Hindenburg Research’s allegations against Adani Group are threatening to unravel the meteoric rise of 60-year-old Indian tyc00n Gautam Adani, whose wealth surged by $44 billion in 2022 when many billionaires saw their fortunes shrink.In an almost 100-page report released Jan. 24, Hindenburg accused Adani Group of “pulling the largest con in corporate history,” having “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”
Within days, Adani struck back with a 413-page rebuttal, decrying what it called “a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.” Hindenburg in return said the rebuttal failed to address key allegations and was “obfuscated by nationalism.”
Short selling is a centuries-old, sometimes controversial strategy where an investor alleges bad practices in a company and publicizes it, seeking to profit. While issuing its report, Hindenburg said it had taken a short position in Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments.
As both sides dig in, the stakes are rising for Adani and Indian markets.
By The Numbers
- $100 Billion+ Market value wiped off Adani Group companies since Hindenburg's report was released, as of Feb. 2
- 13th Gautam Adani's ranking on the Bloomberg Billionaires Index, down from 4th place
- 85%+ The amount of downside Hindenburg sees for Adani-listed firms "purely on fundamentals”
Why It Matters
Adani’s personal fortune — Asia’s biggest when Hindenburg released its report — is built on a sprawling business empire that encompasses numerous industrial powerhouses in India. This includes the country’s largest private-sector port and airport operators, coal mining and trading, distribution of natural gas, and more recent forays into media and cement. A close ally of Indian Prime Minister Narendra Modi, the tyc00n had been seeking to diversify his empire and mount ambitious expansion plans abroad.Questions have long swirled around the Adani Group’s finances, but the latest salvo from Hindenburg is its biggest challenge yet. Led by Nathan Anderson, its research has claimed numerous corporate scalps in the past. Hindenburg’s short bets against electric-vehicle maker Nikola Corp. preceded a plunge of over 90% in the company’s stock, with founder Trevor Milton convicted of defrauding investors in October. The research firm has targeted about 30 companies since 2020, and their shares have fallen on average by 26% six months later, according to Bloomberg News calculations.
As Adani’s empire spirals into crisis, investor confidence has been shaken in both the group and Indian markets more broadly. A planned $2.4 billion share sale in the group’s flagship company, Adani Enterprises, ended up getting scuttled, with its bonds subsequently plunging to distressed levels. The question now is what Adani will do to prevent the turmoil from getting out of control.