"Decoding Adani Scandal: Hindenburg Research Unveils Allegations of Market Manipulation & Fraud"
The #AdaniGroup and #Hindenburg Research are engaged in a highly charged and impactful verbal altercation that has resulted in a significant loss of market capitalization of nearly $72 billion in a mere 72 hours. Hindenburg, a prominent short-selling entity, which exploits price declines through the sale of borrowed stocks, has gained notoriety for its exposé on the fraudulent practices of #Nikola Motors in 2020. This revelation led to the downfall of founder Trevor Milton and a catastrophic dip in the stock price of over 90%.
Gautam Adani, born in 1962 in Gujarat, rose from humble beginnings as a textile merchant to become a prominent business magnate in Mumbai through his exceptional business acumen. Despite dropping out of university, Adani's journey started as a diamond sorter and culminated in the establishment of the coveted Mundra Port, which remains under his ownership. Adani's vast business empire comprises half a dozen major companies, including India's largest port operator and airport manager, with interests spanning energy, transportation, and infrastructure.
Adani Group's listed trading house, #AdaniEnterprises, reported a staggering $9.3 billion in sales in the year ending March 31, 2022. Adani's political connections and ranking among the top 10 on the Bloomberg Billionaires Index make him a formidable force in the Indian corporate landscape, despite recent fluctuations in his net worth. However, Adani and his family have faced allegations of criminal records and unethical business practices.
What are Hindenburg’s main allegations?
Hindenburg, founded by short-seller Nathan Anderson, issued a 100-page report accusing the Indian conglomerate of using a web of companies in tax havens to inflate revenue and stock prices, even as debt piled up. Among the allegations:
It identified 38 Mauritius shell entities controlled by Adani’s brother, Vinod Adani, or his close associates plus entities controlled by him in other tax havens.
The offshore shell network seems to be used for earnings manipulation.
Adani Group has previously been the focus of four major government investigations relating to allegations of fraud.
Adani Enterprises and Adani Total Gas appear to be audited by a tiny firm, with no current website, only four partners and 11 employees, and which has audited just one other listed firm.
The auditor “hardly seems capable of complex audit work,” it said, when Adani Enterprises alone has 156 subsidiaries and many more joint ventures.
The group has been accused of manipulating stock prices through various unethical methods such as blocking the supply chain, creating shell companies, and manipulating the demand and supply.
Hindenburg also said it had taken a short position — basically a bet that the stock price would go down — in Adani’s companies through US-traded bonds and non-Indian-traded derivatives. The shares in fact plummeted, erasing tens of billions of dollars in market value from Adani’s flagship.
How did Adani respond?
Adani countered Hindenburg's allegations on Jan. 29, claiming 65 of 88 questions were addressed in public disclosures. They called Hindenburg's conduct "fraud" and pledged to defend stakeholders by seeking remedies before authorities. Hindenburg dismissed Adani's response as ignoring key allegations and being "obfuscated by nationalism."
Why am I writing about this ?
The news affects my portfolio, like many others and it's important to base investment decisions on data and facts rather than emotions or nationalist theories. Read Adani's financial reports and news from credible Indian media sources, and make rational decisions based on the market's performance.
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