Adani Group Shares Slide After Hindenburg Alleges ‘Largest Con In Corporate History’
Siladitya Ray
Forbes Staff
Covering breaking news and tech policy stories at Forbes.
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Jan 25, 2023,02:20am EST
Updated Jan 25, 2023, 04:37am EST
TOPLINE
Shares of India’s Adani Group companies slid sharply on Wednesday morning after activist investment firm Hindenburg Research disclosed a short position against the conglomerate, while accusing the companies owned by the world’s third richest person, Gautam Adani, of fraud.
Chairperson of Indian conglomerate Adani Group, Gautam Adani, speaks at the World Congress of ... [+]
AFP VIA GETTY IMAGES
KEY FACTS
In a
report disclosing its short position, Hindenburg alleged that Adani Group companies—owned by Asia’s richest man—had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”
Shares in Adani Enterprises, Adani Group’s flagship company, were down more than 3% to Rs 3,333 ($40.77) Wednesday afternoon while Adani ports slumped by more than 6.5% to Rs 711.
Other Adani Group listed companies also fared poorly, with food company Adani Wilmar’s stock dropping nearly 5%, Adani Power 4.7%, Adani Transmission 5.19%, Adani Total Gas 4.77% and Adani Green Energy 3.55%.
PROMOTED
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 it has taken its short positions “through U.S.-traded bonds and non-Indian-traded derivative instruments.”
The timing of the disclosure is likely a major blow for the conglomerate as its flagship firm Adani Enterprises is set to carry out a Rs 200 billion (USD 2.45 billion) follow-on public offering on Friday.
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CRUCIAL QUOTE
In a statement shared with
Forbes, Adani Group CFO Jugeshinder Singh dismissed Hindenburg’s report, saying it is “a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.” The statement adds that the company was never contacted by Hindenburg and criticizes the timing of the report’s publication, saying it “clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming Follow-on Public Offering from Adani Enterprises.”
FORBES VALUATION
Wednesday’s selloff, after Hindenburg’s revelation, has led to a 5% or $6.4 billion drop in Gautam Adani’s fortune. According to our estimates, Adani’s
net worth now stands at $120 billion, making him the world’s
third richest person. If the selloff continues, Adani could cede third place to Jeff Bezos whose net worth we estimate to be $119.5 billion.
NEWS PEG
In its
report, Hindenburg makes multiple serious allegations against the Adani family and their group of companies, including the purported use of offshore shell entities and stock manipulation. Hindenburg says it has identified 38 alleged shell companies based in Mauritius “controlled by” Vinod Adani, Gautam Adani’s older brother, along with several other similar firms based in Cyprus, the UAE, Singapore, and several Caribbean Islands. The report alleges the shell companies are used for “stock manipulation” and “laundering money,” using Adani Group’s private companies, onto the books of listed firms “in order 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 “large, flagrant fraud [taking place] in broad daylight” because of a fear of reprisal. As of Wednesday afternoon, the Hindenburg report has seen sparse coverage in Indian media outside of syndicated reports from business news wires like Reuters or Bloomberg.
KEY BACKGROUND
Hindenburg research gained prominence back in 2020 when one of its reports helped bring down Trevor Milton, the founder of the electric truck company Nikola. In its report, Hindenburg
accused Nikola of being “an intricate fraud built on dozens of lies” and said Milton was responsible for most of it. The company founder stepped down and was later found guilty of criminal and securities fraud. Hindenburg has also taken on Clover Health and electric vehicle maker Lordstown Motors. In July last year, Hindenburg
disclosed a long position on Twitter, betting on the fact that Elon Musk’s planned $44 billion acquisition of the social media company would go through despite efforts by the billionaire to back out of the deal.
