The Adani Group vs The Hindenburg research report is turning ugly day by day. Adani Group stocks fell 5-20% on Friday, wiping out ₹3.19 trillion in investor wealth after Hindenburg Research said it stood by its findings of alleged share price manipulation and accounting fraud by the conglomerate led by the World's 11th richest man Gautam Adani & his family. The short-seller firm Hindenburg report published detailed research and the New York-based firm claimed that it prepared the report in the past 2 years by closely following Adani's investment and stocks. Hindenburg published its research by calling Gautam Adani- 'The Longest & Biggest Corporate Fraud Ever' which the Adani Group strongly denied. Hindenburg's research report raised 88 questions in its paper from the Adani Group which the Indian-conglomerate company later rubbished the accusations. Although the Adani Group came forward and denied the allegations labeled by the US-based research team Hindenburg Research counter alleged citing not addressing any 'substantive issue' raised in their report. Following that, the Adani Group raised 400-plus pages of rebuttal, however, Hindenburg rejected it and shared their statement saying, "Fraud Cannot Be Obfuscated By Nationalism Or A Bloated Response That Ignores Every Key Allegation We Raised". Amidst Adani vs Hindenburg, it is the Indian stock market that is witnessing the bloodbath and investors have been losing in millions. Now, the question arises who is the man behind Hindenburg's research report that wiped out Rs 3.19 trillion from Adani Group?
Who is Hindenburg research founder Nathan Anderson?
Hindenburg Research LLC is an investment research firm with a focus on activist short-selling founded by Nathan Anderson based in New York City. Talking about Hindenburg Research Founder, Nathan Anderson graduated from the University of Connecticut with a degree in international business and started his career in finance at data company FactSet Research Systems Inc, where he worked with investment management companies. In one of his earlier interviews, Nathan Anderson revealed about his early life and stated that he also worked as an ambulance driver. "I realized they were doing a lot of run-of-the-mill analysis, there was a lot of conformity," he had told the Wall Street Journal (WSJ) in 2020. Furthermore, he also worked as an ambulance driver in Israel.
It is pertinent to mention here that Nathan Anderson on his LinkedIn page says that it gave him "experience thinking and acting under extreme pressure." Interestingly, Anderson has said in interviews that Harry Markopolos, an analyst who first flagged Bernie Madoff's fraud scheme, is his role model. For the unversed, Bernie Madoff was an American financier who plead guilty to committing the largest investment fraud to ever happen in the US — cheating tens of thousands of investors out of nearly $65 billion with his infamous Ponzi scheme.
Now, coming to Hindenberg's research, Nathan Anderson founded it in 2017, as a forensic financial research firm that analyses equity, credit, and derivatives. On its website, Hindenburg says it looks for "man-made disasters," such as accounting irregularities, mismanagement, and undisclosed related-party transactions. The company invests its own capital. It was named after the high profile disaster of the Hindenburg airship in 1937 which ignited as it flew into New Jersey. After finding potential wrongdoings, Hindenburg usually publishes a report explaining the case and bets against the target company, hoping to make a profit.
Hindenburg's victory in the US
What is Hindenburg's report? New York-based company's research call Adani 'The Largest Con'
Hindenburg is best known for its bet against electric truck maker Nikola Corp (NKLA.O) in September 2020, which generated "a big win," he told the WSJ, declining to specify the amount. As per US media report, the short-seller said Nikola deceived investors about its technological developments. Anderson challenged a video Nikola produced showing its electric truck cruising at high speed - in fact, the vehicle was rolled down a hill. Following the Hindenburg's revelation, a U.S. jury convicted Nikola's founder Trevor Milton, Nikola's founder last year of fraud over allegations he lied to investors. The company agreed in 2021 to pay $125 million to settle with the U.S. Securities and Exchange Commission (SEC) over its representations to investors. Nikola debuted as a listed company in June 2020 and its valuation reached $34 billion some days after, surpassing Ford Motor (F.N). Now, it is worth $1.34 billion. Hindenburg says whistle-blowers and former employees helped it with findings.
Interestingly, for the Hindenburg research report on Adani, the short-seller company has claimed that it has adopted a similar approach by talking to many ex-employees of Gautam Adani and going through tons of documents. In fact, Hindenburg has challenged Adani to sue them in New York so that they can have their hands on some documents and ask them questions. Hindenburg has flagged potential wrongdoing in at least 16 companies since 2017, according to its website, the report mentions.
Accusations made by Hindenburg against Adani
Some of the sensational accusations of the Hindenburg Research says, "Gautam Adani, Founder, and Chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group’s 7 key listed companies, which have spiked an average of 819% in that period."
"The Adani Group has previously been the focus of 4 major government fraud investigations which have alleged money laundering, theft of taxpayer funds and corruption, totaling an estimated U.S. $17 billion. Adani family members allegedly cooperated to create offshore shell entities in tax-haven jurisdictions like Mauritius, the UAE, and Caribbean Islands, generating forged import/export documentation in an apparent effort to generate fake or illegitimate turnover and to siphon money from the listed companies."
"We have identified 38 Mauritius shell entities controlled by Vinod Adani or close associates. We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands.....Gautam Adani’s elder brother, Vinod Adani, has been described by media as “an elusive figure”. He has regularly been found at the center of the government’s investigations into Adani for his alleged role in managing a network of offshore entities used to facilitate fraud."