By Thyagaraju Adinarayan, Subrat Patnaik and Craig Trudell
US short seller Hindenburg Research is targeting Asia’s richest man with accusations of market manipulation and fraud after a run of often-successful bets against companies ranging from electric-vehicle maker Nikola Corp. to Twitter.
The firm run by Nate Anderson published an almost 100-page report on Gautam Adani’s Adani Group, sending shares of the Indian group’s companies tumbling. Hindenburg said it’s short Adani securities via derivatives and US-traded bonds. Adani Group rejected the accusations as “baseless” and “selective misinformation.”
The ramifications for Adani’s personal fortune were swift — his net worth tumbled by $US5.5 billion ($7.7 billion), according to the Bloomberg index.
Hindenburg has targeted about 30 companies since 2020, and their stocks on average lost about 15 per cent the next day, according to calculations by Bloomberg News. The shares on average were down 26 per cent six months later.
Even as Adani disputes the allegations, some fund managers are likely to bail out of Adani stocks because of the heightened focus on environmental, social and governance criteria.
“Given Hindenburg’s reputation, one can assume that these allegations have been thoroughly researched,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM GmbH.
With the campaign, Hindenburg is taking on its biggest target by far and making a foray into Indian stocks that’s rare for a US short seller. Anderson’s most high-profile short attack targeted electric-vehicle maker Nikola, which he accused of “an ocean of lies.”
Anderson’s firm follows the standard procedure for a so-called activist short: After researching a potential target, Hindenburg places a bet that the stock will decline, then trumpets its research publicly, using social media to get the message out. Hindenburg’s Twitter account has more than 259,000 followers, while Anderson’s personal handle has another 26,500.
Activist shorts hold themselves out as watchdogs who protect investors from accounting and management misdeeds, while the companies they target typically accuse them of market manipulation.
Regulators often have pushed back against short sellers, and the US Justice Department in 2021 collected information on dozens of investment firms and researchers as part of a sweeping hunt for potential trading abuses by shorts, according to people with knowledge of the matter. No charges have been announced from the investigation.
Hindenburg wasn’t immediately available to comment on its track record. Adani Group’s chief financial officer said the research was a “malicious combination of selective misinformation and stale, baseless and discredited allegations.“
Source: Thanks smh.com