Adani Group shares fall after Hindenburg claims ‘biggest fraud in corporate history’

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Shares of Indian companies Adani Group fell sharply on Wednesday morning after investment firm Hindenburg Research revealed a short position against the conglomerate while accusing companies owned by the world’s third-richest man, Gautam Adani, of fraud.

Key facts

In a report revealing his short position, Hindenburg alleged that Adani Group companies, owned by Asia’s richest man, had “engaged in a brazen scheme of stock manipulation and accounting fraud over decades”.

Shares of Adani Enterprises, the flagship company of the Adani Group, fell more than 3 percent to 3,333 rupees ($40.77) on Wednesday afternoon, while Adani Ports tumbled more than 6.5 percent to 711 rupees.

Other Adani Group listed companies also underperformed, with shares of food company Adani Wilmar down nearly 5%, Adani Power 4.7%, Adani Transmission 5.19%, Adani Total Gas 4.77% and Adani Green Energy 3 .55%.

Shares of Indian news broadcaster New Delhi Television (NDTV), which was recently acquired by Adani in a hostile takeover, were also down 5%, while cement companies Ambuja and ACC, which were also recently acquired by Adani, fell 8% and 6 .6%. respectively.

Hindenburg says he took his short positions “through US-traded bonds and non-Indian-traded derivatives”.

The timing of the disclosure is likely to be a major blow to the conglomerate as its flagship firm Adani Enterprises is poised to carry out a 200 billion rupee ($2.45 billion) follow-on public offering on Friday.

Decisive quote

In a statement shared with Forbes, Adani Group CFO Jugeshinder Singh dismissed the Hindenburg report, saying it was a “malicious combination of selective misinformation and outdated, baseless and discredited claims that have been tested and rejected by the highest courts of India”. The statement added that Hindenburg had never contacted the company and criticized the timing of the report’s publication, saying it “clearly betrays a brazen, bad faith intention to undermine the reputation of the Adani Group with the primary aim of harming the upcoming follow-on public offering by Adani Enterprises.”

Forbes Rating

Wednesday’s sell-off, following the Hindenburg revelation, saw Gautam Adani’s fortune drop by 5%, or $6.4 billion. According to our estimates, Adani’s net worth now stands at $120 billion, making him the third richest person in the world. If the selloff continues, Adani could cede third place to Jeff Bezos, whose net worth we estimate at $119.5 billion.

News Peg

In his report, Hindenburg made a number of serious allegations against the Adani family and their group of companies, including the alleged use of offshore companies and stock manipulation. Hindenburg says it has identified 38 alleged shell companies based in Mauritius “controlled by” Vinod Adani, the elder brother of Gautam Adani, along with several other similar firms based in Cyprus, the UAE, Singapore and several Caribbean islands. The report alleged shell companies were being used to “manipulate shares” and “launder money” using private companies of the Adani Group, on the books of registered firms “to maintain the appearance of financial health and solvency”. . The report is also critical of “investors, journalists, citizens and even politicians”, saying they have not spoken up about the “huge, blatant fraud” [taking place] in broad daylight” due to fear of reprisals. As of Wednesday afternoon, the Hindenburg report had received scant coverage in the Indian media outside of syndicated reports from business news outlets such as Reuters or Bloomberg.

Key background

Hindenburg’s research gained notoriety in 2020 when one of its reports helped bring down Trevor Milton, the founder of electric truck company Nikola. In his report, Hindenburg accused Nicholas of being “an elaborate hoax built on scores of lies” and said Milton was responsible for most of them. The company’s founder resigned and later pleaded guilty to felony fraud and securities fraud. Hindenburg also took over Clover Health and electric vehicle maker Lordstown Motors. In July of last year, Hindenburg revealed a long position on Twitter, betting that Elon Musk’s planned $44 billion acquisition of the social media company would go ahead despite the billionaire’s efforts to walk away from the deal.

More information

Adani shares fall after Hindenburg Research bets against conglomerate (Financial Times)

Adani shares fall after Hindenburg accuses ‘brazen’ fraud (Bloomberg)

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