By A Reporter From THE CULT
The Group is accused of stock manipulation and accounting fraud by US-based short sellers Hindenburg Research
Hindenburg Research, a US investment firm, has published a report accusing Indian conglomerate Adani Group of engaging in a “brazen stock manipulation and accounting fraud scheme.” The report has led to a decrease in shares for companies tied to the empire of Gautam Adani, the world’s third richest man, erasing $9.4bn in value. The report claims that Adani may have avoided disclosing large asset impairments to investors, which could have weighed on the net income of its listed flagship, Adani Enterprises.
Some financial analysts in the past have expressed concern over how the share prices of Adani Group companies have continued to soar given their high debt and sky-high valuations. But Hindenburg, which describes itself as “popping bubbles as we see them,” has gone way farther in its offensive than any previous critics of the conglomerate.
The allegations have led to a fall in shares in companies tied to the empire of Gautam Adani, the world’s third richest man, erasing $9.4bn in value. The report claims that Adani may have avoided disclosing large asset impairments to investors, which could have weighed on the net income of its listed flagship, Adani Enterprises.
The research firm, set up in 2017, which says it looks for “man-made disasters” involving accounting irregularities, mismanagement and undisclosed transactions, was named after the hydrogen-filled Hindenburg airship that exploded into flames in 1937. During its short history, the company has made a name for itself for highlighting corporate wrongdoing or shortcomings. Bloomberg quoted a Singapore analyst as saying Hindenburg “are renowned short sellers. Their track record has been strong…”
Hindenburg has made successful bets against various companies including electric vehicle-maker Nikola Corp
Hindenburg has made successful bets against various companies including electric vehicle-maker Nikola Corp. Nikola had a $34-billion stock market value but now is worth $1.3 billion and a US jury last year convicted founder Trevor Milton of fraud. But the Adani Group is Hindenburg’s largest target to date.
In total, Hindenburg has targeted some 30 companies since 2020 and their stocks on average lost about 15 per cent the next day, Bloomberg reported. The shares on average were down 26 per cent six months later.
The Hindenburg report sent the market value of 10 Adani-owned stocks, including cement makers and media firm New Delhi Television Ltd., down by some $12 billion on Wednesday, Bloomberg said. The share market is closed Thursday for Republic Day.
The alleged transactions in the report include a private company called Carmichael Rail and Port Singapore Holdings, which has ties to Adani, paying A$147m for unspecified “work in progress” assets from the Australian operations, without a detailed description. The same private company paid A$155m for the right to use the rail facilities at the Queensland operation, and also received A$100m from an Adani subsidiary to pay off debt.
In response to the report, Adani Group’s legal head, Jatin Jalundhwala, said in a statement: “We are evaluating the relevant provisions under the US and Indian laws for remedial and punitive action against Hindenburg Research.” The company also described Hindenburg’s report as “maliciously mischievous and unresearched” and said it is “deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO (Follow-on Public Offering) from Adani Enterprises.”
The report has also led to a reaction from investors, with some expressing their satisfaction at the fall in share prices, while others have expressed concern about the future of the Adani Group. The report has also led to volatility in Indian stock markets, which has caused unwanted anguish for Indian citizens.
The Hindenburg report has called for a closer look into the Adani Group and its practices, and it remains to be seen how.