‘Short Seller’ Hindenburg Profited From Triggering Adani Groups Price Plunge? Was It A Hit-Job Tool Driven By Certain Entities And A Score Settled By A Certain Journalist Fired After Adani Takeover? Or Is It Case Of ‘There’s No Smoke Without Fire’?
Gautam Adani was indisputably not only India's but also Asia's richest man until a few days ago; however, it all changed after the Hindenburg made specific allegations on the group resulting in his fortunes slipping away as the stocks of almost all Adani companies crashed in the aftermath of the report. However, can Hindenburg Research firm be trusted? Is Hindenburg nothing but a tool to be used by and for 'short sellers'? What was its motive, a financial incentive to see Adani's stock price fall? And why are reports surfacing of a specific reporter having visited their office in New York?
Not many in India would have known or heard of Hindenburg Research Firm up until a few days ago, i.e. in the present, this small research company with as little as six employees (as per reports) has dealt such a massive blow to one of India’s leading conglomerate and its leadership, Gautam Adani in particular that it has caught the attention of the entire business world as well as investors.
Hindenburg came out with a sensational report on the inner workings of the Adani Group on January 24, and well it received such comprehensive coverage that a tiny spark turned into a massive fire bringing with it an enormous downfall in Adani stocks by more than 45%.
But getting into the details of Hindenburg Research Firm has revealed one spectacular point; it is not just a philanthropic research company, it is rather an “activist short seller”, with most likely a motive – which is not just reserved to public service but also with a financial incentive — in making Adani’s stock price fall.
Now the question comes, why? to answer this, we will have to do a bit of digging about what this company has done in the past and what are its present motives, and surely you will understand that it is not all that simple and there is a much that may be involved here!
Digging Into Hindenburg Research Firm
The efforts taken by this small obscure firm in the United States, Hindenburg is a short-seller specialising in forensic financial research, founded in 2017 by Nathan Anderson.
Is Hindenburg Research under investigation in the United States?
The US short seller is among a few notable firms that are being investigated by the DoJ (since 2021) for potentially unlawful trading tactics.
The probe seeks to confirm whether short-sellers used illegal trading tactics to drive down stock prices by sharing damaging research reports ahead of time.
According to some media reports from last year, federal prosecutors have held hardware, trading records and private communications as the investigation continues.
Both Hindenburg Research and Nate Anderson feature in the DoJ’s requests for information. It is relevant to note, however, that the firm has not been accused or charged with any wrongdoing in the current.
How do Adani’s allegations benefit Hindenburg anyway?
Let us keep the philanthropic motivations aside; the current situation can and may be making Hindenburg money. As the Research company itself noted in its report, it had taken a ‘short position’ in Adani Group companies through bonds that trade in the US and other investments that trade outside India.
Why Adani? A Plot To Derail India’s ‘Make in India Campaign’?
Adani Group is a multinational conglomerate with holdings in mining, ports, energy, airports, cement, food processing and weapons manufacturing.
Adani has 13 ports in India stretching all the way from Gujrat to Bengal, and needless to say, ports are and have become the beacon for development why since most raw materials in massive quantities can be bought in (imported) and shipped out (exported), and Adani operates these ports with the latest in infrastructure and security systems (paperless).
Also, these are the ports that can handle gigantic ships that need extremely deep docking, keep in mind that India is transitioning from an import economy to an export economy under the ‘Make in India’ campaign, which has largely taken off and thus requires the ports to be efficient, state of the art and paperless!
Which International Market Lost The Most?
China is the answer to the above!
After the campaign was launched, it shrunk the Chinese import appetite, India’s manufacturing took over, and in a span of the years, China has lost substantially in exports to India because of this.
Secondly, India has been emerging strong as a leading player in the global arena, both in politics – things are more or less stable as well as economically, something that would irk many countries that are grappling with economic recession or still handling Covid-related issues.
Could this be an example of wanting to derail India’s growth story?
No, we are not trying to build a conspiracy narrative here; instead, we are trying to establish the benefits v/s philanthropy angle here, which is what Hindenburg also claims.
But it is also pertinent to note the timing of the disclosure of the report – why, when the Adani group was to come out with its FPO, the largest in India’s history — why did it not make it known sooner – financial interest — to tank the stock!
Why Did A Certain Journalist Visit Hindenburg Office?
There are reports that Ravish Kumar was fired after Adani took over NDTV, and a particular entity has tweeted that this was right after he visited New York for one month. During one month, Ravish Kumar reportedly visited Hindenburg new york office seven times, and each meeting lasted for avg two hrs.
If these reports are accurate and to be believed, then what could be the reason or the motivation behind this?
And why should the report come out right when Adani group was to come out with its FPO?
This leaves many questions to be asked — hence what Hindenburg did and does is that it makes its profits by identifying “man-made disasters floating around in the market”, and then it bets on the stock falling and then publicises that company’s negatives – which it did in Adani’s case.
What Should We Consider In Adani’s case?
- Did or Is Adani Group indulging in fraudulent activities?
The point here is that there has to be some wrongdoing somewhere, big or small, which provided the ‘food’ for these investigations, and this is where the government agencies of India need to start working.
- Does society benefit from information regarding fraud coming to light?
Yes, most definitely!
- If there were no financial incentives, would a company actually spend two years doing detailed forensic analysis?
Most Likely –No!
Conclusion: Exposing fraud is in the public interest; at the same time, for Hidenburg, there may be some financial incentive to do so in Adani’s Case.
Existing shareholders are losing from Adani’s stock tumble, but that should properly be credited to the alleged fraud if that is true indeed, as brought to notice by this research firm, not the report.
Also, if the report is truthful, blaming Hindenburg for Adani’s stock crash is like blaming a fire alarm for alerting us against fire.
But, if the allegations are unfounded, then indeed, this is a strategy to make a dent and probably the work of a few wanting to gain financially or personally.
For now, this is the most interesting case that needs to be understood with intelligence, patience and an unbiased approach – let truth prevail!