- The Hindenburg report sent the Adani Group market value crashing down over $150 billion.
- The Hindenburg-Adani saga underlines how regulatory bodies should play a vital role in preserving market integrity, more so when activist short-sellers emerge as prime influencers in the dynamics of the market.
- For India, the episode is one of wake-up calls for enforcing the very financial regulatory frameworks of the country to prevent such controversies from arising in the future.
On January 24, 2023, Hindenburg Research published a report targeting the Adani Group and claimed that Gautam Adani was manipulating their stocks. The report caused ripples in the financial markets and led to drastic erosion in the market capitalization of Adani Group’s companies.
The Adani Group termed the allegations as “baseless” and “malicious”. It was too late, however. The panic-stricken investors continued their selling spree in the stock market. The Group tried to reassure stakeholders through various measures. However, the crisis of confidence could not be handled.
Navigating the Follow-On Public Offer (FPO)
Adani Enterprises managed to go through with its ₹20,000-crore FPO while others faced loss with subscribed by investors till January 31, 2023. Thus, it marked a kind of resilience and confidence in the minds of some investor groups even while controversy hovered above the firm. Legal and Regulatory Measures This resulted in allegations prompting immediate legal and regulatory action.
A PIL was filed in the Supreme Court of India seeking that the high court look into the issues raised by Hindenburg. In March 2023, the Supreme Court of India directed SEBI to speed up the probe into possible Hindenburg stock manipulation and financial wrongdoings. A six-member expert committee was formed simultaneously to seek insight and understanding into the matter. Its first report, submitted in March 2023, found no apparent manipulation by the Adani Group. The report gave the conglomerate some breathing space.
In May 2023, SEBI requested further time to finish its investigation citing the complexity involved in collecting information from foreign agencies. The Supreme Court allowed more time until August 14, 2023. In August, SEBI reported that most investigations were completed except for two cases involving foreign portfolio investments connected with the Adani Group.
Market Impact and Recovery
The Hindenburg report sent the Adani Group market value crashing down over $150 billion. By mid-2024, however, stocks had bounced back significantly in recovery, representing recovered investor confidence. The recovery was seen as a sign of the Adani Group’s resilience in the face of adversity.
In July 2024, Hindenburg revealed that it had been earning approximately $4 million on short positions against the Adani Group. This revelation fueled criticism, as it suggested financial incentives behind the firm’s reports. Further, this proved that the report has outbalanced the financial gains that the short-seller made from short-selling.
In August 2024, Hindenburg accused SEBI Chairperson Madhabi Puri Buch and her husband of investing in an offshore fund associated with the Adani Group. Both SEBI and the Adani Group vehemently denied these allegations, which they branded as recycled allegations to undermine investor confidence.
Short-sellers typically borrow securities, sell them on the open market, and repurchase them later at a lower price once negative reports drive stock prices down. However, the alleged involvement of hedge funds raises concerns as they could also place parallel bets, further pressuring stock prices.
The saga marked a judicial landmark in January 2024, when the Supreme Court dismissed a plea by SEBI for a Central Bureau of Investigation (CBI) investigation into the charges. The court ruled once more that SEBI had jurisdiction over matters of market regulation and stock price manipulation. Gautam Adani welcomed the verdict and said that he appreciates the legal clarity it has brought.
The Hindenburg-Adani saga underlines how regulatory bodies should play a vital role in preserving market integrity. Against this backdrop, activist short-sellers emerge as a prime influencer in the dynamics of the market.
Collusion with Hedge Funds
Latest reports suggest that Nate Anderson, the founder of Hindenburg Research, is under scrutiny for allegedly colluding with hedge funds in preparing reports that target companies. A Canadian portal, citing court documents filed in Ontario, has claimed that the Anson hedge fund played a role in the preparation of Hindenburg’s reports. Moez Kassam, the head of Anson hedge fund, admitted that his firm had shared research “with a wide variety of sources”, including Hindenburg’s Anderson.
According to The Market Frauds portal, court documents suggest that Hindenburg colluded with Anson while preparing a bearish report. The preparation of such reports without disclosing participation could be considered securities fraud under US SEC regulations.
Hindenburg Research Announces Closure
In January 2025, Nate Anderson announced the shutting down of Hindenburg Research, citing regulatory scrutiny, legal battles, and dwindling investor confidence as key reasons. The firm, which gained international attention for its aggressive short-selling reports, faced multiple lawsuits in the US, Canada, and India. Investigations by regulators, hedge funds, and independent financial watchdogs raised concerns about its methods, including possible market manipulation through selective leaks of research reports. Several institutional investors who previously relied on Hindenburg’s reports distanced themselves, questioning the firm’s credibility after allegations of collusion with hedge funds emerged.
In his farewell statement, Anderson maintained that Hindenburg “stood for financial transparency”, but admitted that the legal and financial burden of defending its methods had become unsustainable.
Conclusion
The Hindenburg-Adani saga highlights the crucial role of regulatory bodies in maintaining market integrity. The incident underscores how activist short-sellers can influence global financial markets, raising ethical and legal questions about their methods and motivations.
For India, this episode serves as a wake-up call for stricter enforcement of financial regulations to prevent similar controversies in the future. The Hindenburg-Adani saga may have receded into the background, but it reminds everyone that transparency, effective regulation, and a watchful financial system must be maintained for the interests of investors. In this story, the comeback of the Adani Group to relevance also represents the power of resilience, offering a lesson to corporate institutions around the world.
References:
- Hindenburg Research. (2023). Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History. [https://hindenburgresearch.com/adani/]
- Supreme Court of India. (2023). Order on SEBI’s Investigation into Adani Group Allegations. [https://main.sci.gov.in/]
- Securities and Exchange Board of India (SEBI). (2023). Regulatory Actions and Investigation Reports on Adani Group. [https://www.sebi.gov.in/]
- Reuters. (2024). Hindenburg’s Short Position and Financial Gains from Adani Report. [https://www.reuters.com/]
- The Economic Times. (2024). Hindenburg Research’s Alleged Ties with Hedge Funds and Regulatory Scrutiny. [https://economictimes.indiatimes.com/]
- Bloomberg. (2024). Adani’s Market Recovery and Future Strategies Post Hindenburg Report. [https://www.bloomberg.com/]
- Bloomberg. (2024). Hindenburg Research to Shut Down Amid Legal Battles and Regulatory Scrutiny. [https://www.bloomberg.com/]
Aayush Pal 
Parag Gilada 
Satish Chogule