The Adani Group is led by Gautam Adani, the third richest man in the world (now the fourth). It has lost billions in market value in two days, all due to a report by Hindenburg Research, specialising in “forensic financial research”.
In 1937, a German zeppelin called the Hindenburg caught fire and killed 35 people on board.
Hindenburg Research, its namesake, says it aims to prevent similar “totally man-made, totally avoidable” disasters, but when business markets are concerned: “We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.”
Founded by Nate Anderson, Hindenburg Research has just published a controversial report again, this time on the Adani Group, “the second largest conglomerate in India”, after what they say was two years of painstakingly detailed research.
Anderson and colleagues write that “the INR 17.8 trillion (US $218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades”.
The report highlights Adani Group’s Chairman and Founder “Gautam Adani, who is currently the 3rd richest man on earth, previously having reached the #2 spot.” Since the report was published, Gautam Adani has slipped in the Bloomberg Billionaires Index, to number 4.
Hindenburg Research points fingers at Adani Group as well as the Indian government: “Adani has pulled off this gargantuan feat [of illegal undertakings] with the help of enablers in government and a cottage industry of international companies that facilitate these activities.”
Furthermore, the research company lists a series of 88 questions addressed to Adani Group at the end of the report, noting “We view sunlight as the best remedy, and hope this report helps illuminate these issues.”
Hindenburg Research’s allegations caused the stock price of the Adani Group to crash, CNN reports: “[Gautam] Adani’s business empire contains seven listed companies — in sectors ranging from ports to power stations — and shares in most of them fell by between 3% and more than 8% on Wednesday.”
Reuters reports that “collectively, the seven listed group companies lost $10.73 billion in market capitalisation.”
Fortune reports that “Hindenburg Research has a history of shining a light on corporate malpractice, successfully predicting the demise or exposing the shortcomings of several companies, including Nikola, Riot Blockchain, and China Metal Resources Utilization.”
According to an Intelligencer report by New York Magazine, short sellers “make money by taking positions in the stocks of shaky or shady companies, which pay off if the price goes down — an outcome the shorts hasten with public attacks, publishing investigations on their web platforms and blasting away at their targets (and sometimes at one another) on Twitter.”
While Anderson says he was motivated by “abject horror that something this egregious and wrong could continue to fail forward and upward” [in a previous case, Nikola], the Intelligencer report points out that “Under the [US Securities and Exchange Commission] programme, whistleblowers are eligible for a cut of up to 30 percent of any fines collected as a result of information they provide, which can amount to millions of dollars.”
Hindenburg Research was so confident in its negative findings about Adani that it felt no reticence about declaring: “Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its seven key listed companies have 85 percent downside purely on a fundamental basis owing to sky-high valuations.”
Media statement – II on a report published by Hindenburg Research pic.twitter.com/Yd2ufHUNRX— Adani Group (@AdaniOnline) January 26, 2023
Adani Group reacts
The Adani Group, which is scheduled to launch India’s biggest public secondary share offering (aiming to raise $2.5 billion) on January 27, was not pleased with the report, to say the least.
India Times reports that Adani Group’s legal head Jatin Jalundhwala issued a statement, saying, “We are evaluating the relevant provisions under the US and Indian laws for remedial and punitive action against Hindenburg Research.”
Reuters quoted Adani Group’s Chief Financial Officer, Jugeshinder Singh, who issued a statement to the effect that the company was shocked by the Hindenburg report, calling it a “malicious combination of selective misinformation and stale, baseless and discredited allegations.”
“The Group has always been in compliance with all laws,” the company said, but did not go into discussing the specifics of the critical report.
Hindenburg Research has issued a public statement on Twitter in response to the Adani Group’s legal threats. In it, Anderson and company say that not only did Adani Group “not address a single substantive issue” raised by the researchers, it also has “answered none of the  questions” posed to the company.
Hindenburg Research’s tweet ends with a challenge: “If Adani is serious, it should also file suit in the US where we operate. We have a long list of documents we would demand in a legal discovery process.”
Our response to Adani: pic.twitter.com/6NcFKR8gEL— Hindenburg Research (@HindenburgRes) January 26, 2023