Short seller Hindenburg Research acknowledged that it made just $4 million in profits after making a massive claim that wiped $150 billion out of the value of a major Indian conglomerate owned by one of the world’s richest men.
Hindenburg denied allegations by India’s securities regulator last year that it conspired with a U.S. asset manager to engineer a short sale against Adani Group using non-public information, allegations that if proven would violate Indian rules.
The New York City-based company posted a copy of a 46-page “show cause” notice from the Securities and Exchange Board of India (SEBI) on its website on Monday outlining the allegations. The story that began last year US-based short sellers have alleged improper business dealings by Adani.
“To date, Adani has not addressed the allegations in our report, provided responses that ignore all of the important issues we raised, and has comprehensively denied the allegations in the media since,” Hindenburg said in a statement.
Hindenburg, founded by Nathan Anderson in 2017, in a January 2023 report accused Gautam Adani-led Adani Group of perpetrating “the biggest fraud in corporate history”.
Short sellers accused the company of committing decades-long corporate fraud and using “secretive offshore shell companies” to circumvent local regulations.
SEBI alleged that Hindenburg had “relied on inferences and speculations to exaggerate some facts and downplay other facts so as to draw adverse inferences against Adani Group Companies”.
A total of six companies, including Hindenburg, Kingdon Capital Management and a Mauritius-based trading fund set up by Kotak Mahindra Bank, were involved in “unfair trade practices”, the notice said.
SEBI also alleged that Mr Hindenburg shared a draft of the Adani report with Mr Kingdon in November 2022, about two months before the report was eventually made public.
Hindenburg He dismissed the accusations as “nonsense.”“
“SEBI has shirked its responsibilities and appears to be more focused on protecting those who perpetrate fraud than on protecting investors who are victims of fraud,” it said.
Before the Hindenburg Report was released, Gautam Adani’s estimated net worth was around $122 billion. He finished 15th in the Bloomberg Billionaires Index for 2023 with an estimated net worth of $83.2 billion.
In March, U.S. prosecutors opened a bribery investigation into one of his companies, citing “potential violations” of anti-corruption laws.
The Hindenburg, named after the German airship that exploded over New Jersey in 1937, will investigate accounting fraud, mismanagement and undisclosed related-party transactions.
They take a “short” position on the company in question in the hope of making a profit after the report is released.
Short selling occurs when an investor bets on a company’s stock price, betting that the price will fall.
Hindenburg rose to prominence in September 2020 when it made an infamous short sale against electric truck maker Nikola Inc, alleging that the company had lied to investors about its technology.
A U.S. jury last year found Nikola founder Trevor Milton guilty of fraud, and the company agreed to pay $125 million in 2021 to settle with the Securities and Exchange Commission over investor representations.
