US Short Seller Hindenburg Research, which accused Adani of stock market manipulation, has issued a show-cause notice asking why it should not act against the short seller for violating norms related to “prohibition of fraudulent and unfair trading practices in the securities market.”
The notice released by Hindenburg took a defiant stance by charging SEBI with not acting on allegations in its Adani report.
However, Hindenburg described the notice as “nonsense” and “nebulous” and alleged that SEBI has attempted to silence the firm. Hindenburg claimed it only made $4 million from the operation, which resulted in a $153 billion drop in the Adani Group’s valuation.
‘SEBI has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimised by it.” Hindenburg stated.
SEBI has alleged that the research firm has misled the public and has used non-public information to manipulate the prices of Adani’s stock. SEBI has also alleged that partner Kingdom Capital knew about Hindenburg research before the notice was made public and a profit-sharing agreement between the two was made. As per SEBI’s investigation, the kingdom had agreed to share 30% of its net profits from trending securities related to Adani with Hindenburg in exchange for receiving the report two months in advance.
In an interesting twist in the Hindenburg case, the US short seller has alleged that Kotak Mahindra created and oversaw an offshore fund structure that was used by its “investor partner.” Meanwhile, the Adani group has time and again denied all the allegations made by Hindenburg.
Hindenburg’s Reaction
SEBI’s Notice
“After 1.5 years of investigation, SEBI identified zero factual inaccuracies with our Adani research. Instead, the regulator took issue with things like our use of the word’ scandal’ when describing multiple prior instances of Adani promoters being charged with fraud by Indian regulators and our quoting of an individual that alleged SEBI is corrupt and works ‘hand in glove’ with conglomerates like Adani to help it skirt regulations,” it said.
“Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No. We had one investor partner, and net of costs, we may barely come out above breakeven on our Adani short.” It was added in the statement.
“Our work on Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of,” it further added.
Adani Group
“To this day, Adani has still failed to address the allegations in our report, instead providing a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations,” it said, adding that its January 2023 report had “provided evidence of a vast network of offshore shell entities controlled by (group chairman) Gautam Adani’s brother, Vinod Adani, and close associates.”
“We detailed how billions were surreptitiously moved through these entities, into and out of Adani public and private entities, often without related-party disclosures,” it added.
