A calculated attack on India’s independence, integrity and quality of institutions: The Adani Group’s report on Ports-to-Power Conglomerate
The Adani Group has accused a US investment firm of launching “a calculated attack” on India by publishing a report alleging widespread fraud at the ports-to-power conglomerate.
Over the course of decades, the company was accused of stock manipulation, and accounting fraud. Hindenburg said Adani Group shares are massively overvalued, and it has taken a short position (more on that in a minute) on them, meaning Hindenburg wins when Adani shares fall.
He has a personal fortune of over $92 billion, which is$10 billion more than his Indian colleague, and he is still the richest man in Asia.
“This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors,” it said.
Before the rout, which continued on the Mumbai stock exchange on Monday, markets had been cheering for the businessman and his breathless pace of expansion. Modi prioritized sectors for development and investors bet on the industrialists ability to grow his businesses in those areas.
It said this is not an unnecessary attack on any company but a calculated attack on India’s independence, integrity and quality of institutions.
The Indian conglomerate said the rumors were fact. It then sought to answer them, and published some tables and charts to support its position.
The Mumbai protest against the Jallianwala Bagh event in 1919: The Adani Group, its debt, and the Indian market response
The rebuttal sought to assure investors about the group’s debt and corporate governance practices. Shares in Adani Enterprises, the group’s flagship company, were up over 4% on Monday, but most Adani stocks extended last week’s losses.
The conglomerate’s chief financial officer Jugeshinder Singh compared the Indian market reaction to one of the most horrific events from the country’s colonial past under British rule.
Only one Englishman gave an order and other Indians fired at each other. So am I surprised by the behavior of some fellow Indians? No,” Singh told Mint business daily in an interview published Monday.
On April 13, 1919, British Brigadier General Reginald Dyer ordered his soldiers to fire without warning on a peaceful protest of thousands of unarmed people in Jallianwala Bagh, a public garden in the city of Amritsar. They stopped firing when their weapon ran out. The horrific event is now known as the Jallianwala Bagh or Amritsar Massacre.
The Adani Group has attempted to fit its rise and wealth with India’s success, it said in a post on Sunday.
The rest of the response consisted of over 300 pages of court records, as well as 53 pages of high level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship.
An Observational Analysis of the Hindenburg Research Bets against High-Flying Corporations and the Adani Group: What do short-selling investors should have in mind?
Hindenburg Research — named after the 1937 airship disaster — is a relatively young, small New York financial researcher known for taking bold bets against high-flying corporations that it believes are overvalued, fraudulent, or both.
The Adani Group is led by a 60-year-old businessman who founded it over thirty years ago and is currently India’s largest port operator. He became India’s richest man a year ago, and briefly surpassed Jeff Bezos to become the world’s second-wealthiest.
In a rebuttal of that rebuttal, Hindenburg said “fraud cannot be obfuscated by nationalism,” and that the Adani Group had ignored “every key allegation we raised.”
A friend has a ticket to a football game on Friday night, so you should think about whether or not to give them a gift. You believe the price of tickets could go down due to lack of demand on game day. So you borrow the ticket from your friend, for a small fee, and promise to have it back to them in time for kickoff. Right away, you sell the ticket you borrowed for 50 bucks, betting that by game day the cost of a ticket will be less than $50. And sure enough, bad weather keeps people at home and the stadium starts slashing prices. You buy a ticket for $30, give it to your friend, and pocket the $20 difference (minus whatever fee you paid your friend for the privilege of borrowing.)
In practice, firms that specialize in short-selling are often among the most reviled. Short-sellers like to bet against a craps table that one player’s win will boost everyone else’s.
Wall Street is built to sell securities to the public regardless of quality, which is why critical, adversarial research is needed. Corporations are rife with fraud and investors have little protection.
And to their credit, short sellers were key to exposing major market frauds like Enron in 2001 and the systemic mortgage fraud that nearly cratered the global economy in 2008.
Of course, there’s nothing to stop bad actors in the short-selling world from making exaggerated or bogus claims about a company to try to turn a quick profit.
Source: https://www.cnn.com/2023/01/30/business/nightcap-adani-hindenburg-explained/index.html
The Nightcap Journal: Investigating the Man-Made Disasters in the Market for Financial Malfeasance Efforts
The website states that they think the Hindenburg is the epitome of a man-made disaster. We look for man-made disasters in the market and want to shed light on them so that they do not lure in more people.
It is sort of like a bunch of investigative journalists, but without the ethical baggage. (Journalists cannot retain a financial interest in their subjects; short-sellers like Hindenburg almost always do.)
Hindenburg won its reputation as a bloodhound for financial malfeasance in 2020, when it accused electric vehicle maker Nikola of lying to investors about its truck’s capabilities. The founder of Nikola was convicted of fraud.
The negative press comes at a bad time for Adani, which is trying to raise over $2 billion by issuing new shares. The offer will close on Tuesday.
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