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Short selling is not shareholder activism and such campaigns could be disruptive for management and companies, corporate governance firm InGovern has said in a note.
“Short sellers are not held in high regard in global capital markets and even in the USA, many short sellers, including Hindenburg, are under investigations by the SEC (Securities and Exchange Commission) and DoJ (Department of Justice), as the short sellers are thought to achieve their objectives at all costs and detrimental to the interests of other investors,” said the voting advisory firm.
Also read: Adani Group poses no significant downside risk to Indian banks: CLSA
On Wednesday, US-based Hindenburg—known for its short-selling bets—made allegations of market manipulation and accounting fraud against India’s Adani Group. The scathing report was released the same day flagship firm Adani Enterprises’ Rs 20,000-crore follow-on public offering (FPO) was to open for anchor investors. The report triggered a fall in shares of the seven listed firms belonging to the Adani group and eroded their market value by a cumulative Rs 85,761 crore ($10.5 billion). Shares of all seven firms extended losses on Friday.
InGovern said positive shareholder activism—when investors engage positively with management and work towards bringing about change—should be welcomed and not by short sellers who “are opportunist and very short-term focussed.”
Short sellers and activist investors taking companies head on is a common phenomenon in the US with blue chip firms such as Apple and Tesla coming under attack. However, they are not common in India.
While releasing its report, Hindenburg disclosed that it has built token short position in bonds and securities of the Adani group traded outside of India.
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