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The shares of Adani Group companies fell sharply after investment research firm Hindenburg Research released a report allegng that the group has been engaged in “manipulation and accounting fraud”. The firm said the Adani Group has “substantial debt” and had an 85 per cent downside on their valuations.
Responding to the allegations, Adani Group described the report as a “malicious combination of selective misinformation and stale, baseless and discredited allegations”.
What is Hindenburg Research?
It is a US-based firm that specialises in financial research. It looks for accounting irregularities, illegal or unethical practices and undisclosed issues.
Its website says, “Our experience in the investment management industry spans decades, with a historical focus on equity, credit, and derivatives analysis”.
It adds, “While we use fundamental analysis to aid our investment decision-making, we believe the most impactful research results from uncovering hard-to-find information from atypical sources”.
Why was it named ‘Hindenburg’ Research?
Its name is based on the Hindenburg disaster that took place in 1937 when a German passenger airship caught fire, killing 35 people.
“We view the Hindenburg as the epitome of a totally man-made, totally avoidable disaster. Almost 100 people were loaded onto a balloon filled with the most flammable element in the universe (hydrogen). This was despite dozens of earlier hydrogen-based aircraft meeting with similar fates. Nonetheless, the operators of the Hindenburg forged ahead, adopting the oft-cited Wall Street maxim of ‘this time is different’,” it says on its website.
“We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims,” it adds.
How did it come into being?
The company was founded in 2017 by Nathan Anderson, a student of international business management at the University of Connecticut. He lived in Jerusalem before returning to the US where he worked as a broker at several companies.
Before founding the research company, Anderson had worked with Harry Markopolos, who had flagged Bernie Madoff’s Ponzi scheme. It went on to become the world’s biggest financial fraud ever.
Markopolos was quoted by the Financial Times as saying, “He [Anderson] is a world-class digger…If there are facts he will find them and all too often he’ll discover that there are skeletons in the closet”.
Anderson had told FT, that at Hindenburg, “we come in and try to illuminate some of these problems that might be lurking under the surface at some of these companies, in some of these industries, and see if we can make things better”.
Which other companies have Hindenburg written about?
In 2020, it release a report on Nikola titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America”. It called out “a vast array of alleged lies and deceptions by Nikola in the years leading up to its proposed partnership with General Motors”.
Nikola is an electric vehicle manufacturer which was charged with duping investors by telling them about their new vehicles when no such vehicles existed in reality.
The research company has also released reports on WINS Finance, China Metal Resources Utilization, HF Foods and Riot Blockchain.
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