The Truth About Hindenburg Research and Gautam Adani

Short-sellers have a dubious reputation because they are out to make a quick buck, causing immense suffering at times. In contrast, industrialists often create long term value and Gautam Adani has certainly done so in India and elsewhere.
Adani group VS Hindenburg Research

Adani group VS Hindenburg Research logo displayed on smartphone. Adani Group is an Indian multinational conglomerate, Hindenburg Research is an investment research firm © Poetra.RH /

February 28, 2023 11:36 EDT

On January 24, Hindenburg Research accused Gautam Adani, the third richest man in the world, of pulling the largest con in corporate history. Founded by Nate Anderson, this investment research firm with a focus on activist short-selling claims to specialize in forensic financial research. It began five years ago in 2017 and is based in New York. 

Hindenburg Research accused the Adani Group of brazen stock manipulation and accounting fraud over the course of decades. The firm claimed that the Adani Group had taken on substantial debt, including pledging shares of their inflated stock for loans. Apparently, this had put the entire group on precarious financial footing.

Hindenburg Research also pointed out that eight of the 22 key leaders are Adani family members. They labeled the Adani Group as “a family business,” not a professional corporation. They also pointed out that this family business faced four major government fraud investigations for money laundering, theft of taxpayer funds and corruption, totaling an estimated $17 billion. Hindenburg Research accused the Adani family of creating offshore shell entities in tax-haven jurisdictions like Mauritius, the UAE, and Caribbean Islands to siphon money from the listed companies.

As per The Financial Times, “Gautam Adani’s business empire has had more than $145bn wiped from its value” since the Hindenburg revelations. They triggered a selloff that erased more than 60% “from the value of Adani’s publicly traded companies and rocked an empire that spans ports to airports to energy.” Consequently, Adani has had a fall from grace and is no longer among the top 100 richest people in the world. 

After Indian Prime Minister Narendra Modi came to power in 2014, the Adani Group has expanded rapidly. The opposition alleges that the Modi government has favored Adani. Rahul Gandhi, Jawaharlal Nehru’s great grandson and heir to the Congress Party throne, has alleged that Modi favors Adani and compared the Adani Group to the British East India Company. On February 22, The Financial Times published a report that claimed “that used diplomatic sway and cheap financing to help private Indian companies, including Adani,”

It is easy to get carried away with allegations by a foreign short-seller and a privileged dynast. With elections looming in 2024, the latter has votes to win and an obvious ax to grind. Hindenburg Research has an even more obvious ax to grind. Simply put, it is a short-seller. Short-selling is a phenomenon when an investor borrows a security and sells it on the open market, planning to buy it back later for less money. Short-sellers bet on, and profit from, a drop in a security’s price. In contrast, long investors buy a security in the expectation that its price would increase. 

What really is going on?

Short-sellers often engage in “predatory and opportunistic behavior.” Sometimes, they uncover fraud and, in the case of James Chanos, bring down mighty companies like Enron. In other cases, they ruin companies by their exaggerated claims that spook markets. Hindenburg Research has some big scalps to its name but it has also got some calls wrong. In the case of electric truck manufacturer Nikola, Hindenburg’s revelations led to the resignation of its founder and CEO. In the case of Twitter, the investment firm did not fare that well.

The reality is that Hindenburg Research are no do-gooders. Like the Wolf of Wall Street, this short-seller is out to make a quick buck. It has targeted the Adani Group for that reason and some of its allegations are wildly off the mark.

Over the last few years, the Modi government has focused on industrialization and infrastructure development. The Adani Group has poured tens of billions of dollars in big projects. It operates airports in Mumbai, Ahmedabad, Lucknow, Bengaluru, Jaipur and Guwahati. The Adani Group has invested in ports, electricity transmission, airports, solar energy, road construction and agricultural storage. It has real assets with strong revenue streams.

Not only is the Adani Group generating 20,000 megawatt of solar energy, it is also manufacturing solar panels as well as other equipment for generating renewable energy. It has also invested in the capital-intensive semiconductor business. This is reducing India’s reliance on China and is a jolly good thing not only for the country but also the West.

Unfortunately, there is a hostile view of the Modi government and of India among many in the West. The Economist called “the humbling of Gautam Adani” a test for Indian capitalism. George Soros, an infamous short-seller who caused the crash of the pound in 1992 and the collapse of Asian currencies in 1997, came out guns blazing against both Adani and Modi. He forgot that Adani has created thousands of jobs through industries and infrastructure. The latter will have an enormous multiplier effect on the Indian economy.
In contrast, the short-selling of Anderson—the founder of Hindenburg Research—and Sors, is far more short-term and fails to increase productivity or create assets in the same way as Adani or Henry Ford. Furthermore, both Anderson and Soros represent the white savior complex that Soundarajan Narendran has explored in detail in an earlier article for this publication. They pretend to be knights in shining armor who are saving Indian capitalism and Indian democracy. The reality is that they are profiting by their actions, increasing both wealth and power in the process.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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