Hindenburg targets Asia’s richest man, triggering Adani selloff
SHARES in the Adani Group of companies fell after US investor Hindenburg Research said it was shorting the conglomerate’s stocks and accused firms owned by Asia’s richest man of “brazen” market manipulation and accounting fraud.
Billionaire Gautam Adani’s flagship firm Adani Enterprises and Adani Ports and Special Economic Zone dropped as much as 3.7 per cent and 7.3 per cent respectively on Wednesday (Jan 25).
This was despite relatively small free-floats after Hindenburg, a US-based investment research firm that specialises in activist short-selling, made wide-ranging allegations of purported corporate malpractice following a two-year investigation into the tycoon’s companies.
Cement makers ACC and Ambuja Cements, Adani’s recent acquisitions which are more widely traded, plunged by as much as 7.2 per cent and 9.7 per cent.
The 2032 dollar bond issued by Adani Ports sank 7 US cents to 71.5 US cents on the dollar – the biggest drop since issuance in 2021, according to data compiled by Bloomberg. Adani Green Energy’s note maturing in 2024 fell 2.7 US cents to 92 US cents, the most in three months.
Hindenburg’s report on Tuesday, constituting the research firm’s opinions and investigative commentary where readers are advised that use of the report is at the reader’s own risk, details a web of Adani-family controlled offshore shell entities in tax havens, from the Caribbean, Mauritius and the United Arab Emirates.
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It claims these were used to facilitate corruption, money laundering and taxpayer theft, while siphoning money from the group’s listed companies.
The report is “a malicious combination of selective misinformation and stale, baseless and discredited allegations,” Adani Group chief financial officer Jugeshinder Singh said in a statement.
The report was released on the same day that a key share sale from Adani Enterprises, aimed at attracting a broader network of investors, is set to open for subscription.
The timing “clearly betrays a brazen, mala fide intention to undermine” and damage the share sale plan, said Singh.
The broadside from Hindenburg comes at a critical time for the ports-to-power tycoon. Adani is seeking to raise his international profile and is aggressively branching into new businesses, including cement and media, in his power base of India, where he is seen to enjoy a close relationship with Prime Minister Narendra Modi.
The Adani empire’s expansion plans are closely aligned to the government’s development and economic goals.
Adani rocketed up the Bloomberg Billionaire’s Index last year, past the likes of Bill Gates and Warren Buffett, and his fortune now totals US$118.9 billion, making him the fourth-wealthiest person in the world.
While many of the allegations made by Hindenburg against him were already known, including over-valuations and concentrated holdings by Mauritius-based investors in his companies, some details gleaned from the entire Mauritius registry have been made public for the first time, said Brian Freitas, an Auckland-based analyst who publishes independent research on website Smartkarma.
“It will not only shine a light on the group, but also on corporate governance in India,” he said. But the report is unlikely to have “any big impact on the follow-on offer because the company would have ensured that there is sufficient demand for the book to be covered”.
A prominent research outfit, Hindenburg is best known for its critical reports on the electric-vehicle space.
It was instrumental in bringing down the founder of e-truck company Nikola Corp, which was accused by Hindenburg in 2020 of being built on “dozens of lies”. Nikola founder Trevor Milton eventually stepped down as chairman and was found guilty of securities fraud. More recent targets include Clover Health and Lordstown Motors.
Hindenburg said it had taken a short position in Adani’s companies through US-traded bonds and non-Indian-traded derivative instruments. BLOOMBERG
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