Short seller Hindenburg banked just $4M from $150B market rout after accusing India giant of fraud

Short seller Hindenburg Research admitted it made a measly $4 million after making blockbuster allegations against a major Indian conglomerate that wiped $150 billion of value from the company belonging to one of the world’s richest men.

The disclosure came as Hindenburg denied allegations by India’s securities regulator that it colluded with a US asset manager to use non-public information to set up a short bet against Adani Group last year, which if proven would breach the country’s rules.

The New York City-based firm posted a copy of a 46-page “show cause” notice from the Securities and Exchange Board of India (SEBI) outlining the allegations on its website on Monday, in the latest twist to a saga that began last year when the U.S.-based short-seller alleged improper business dealings by Adani.

“To this day, Adani has still failed to address the allegations in our report, instead providing a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations,” Hindenburg said in a statement.

Hindenburg, founded in 2017 by Nathan Anderson, had accused the Adani Group, headed by Gautam Adani, of operating “the largest con in corporate history” in the January 2023 report.

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The short seller accused the company of being guilty of corporate fraud stretching back decades and using “secret offshore shell companies” to dodge local regulations .

SEBI argued that Hindenburg “has resorted to extrapolation and conjecture to emphasize some facts and understate others in favor of negative inference against Adani Group Companies.”

The notice said that a total of six firms including Hindenburg, Kingdon Capital Management, and a Mauritius-based trading fund set up by Kotak Mahindra Bank had taken part in “unfair trade practices.”

SEBI also claimed that Hindenburg had shared a draft of the Adani report with Kingdon in November 2022, nearly two months before it was eventually published.

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Hindenburg dismissed the accusations as “nonsense. ”

“SEBI has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimized by it,” the company said.

Gautam Adani’s estimated net worth was around $122 billion before the Hindenburg report came out. He ended 2023 in the No. 15 spot on Bloomberg’s Billionaires Index with an estimated net worth of $83.2 billion.

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In March, US prosecutors opened a bribery investigation into one of his firms over “potential violations” of anti-corruption laws.

Hindenburg, named after the German airship disaster that blew up in 1937 over New Jersey, researches accounting irregularities, mismanagement, and undisclosed related-party transactions.

After publishing its reports, it then takes a ‘short’ position against the company in question in the hope of making a profit.

Short-selling is when an investor bets against a company’s stock price in the expectation that it will fall.

Hindenburg’s claim to fame came when it made an infamous short bet against electric truck maker Nikola Corp in September 2020, alleging the firm had lied to investors about its technology.

A US jury convicted Nikola’s founder Trevor Milton of fraud last year. The company agreed in 2021 to pay $125 million to settle with the Securities and Exchange Commission over representations to investors.

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