Adani-baiter Hindenburg Research shuts shop—“from a place of joy”

Nate Anderson founder Hindenburg Research.
Nate Anderson founder Hindenburg Research.

Summary

  • Short-seller Nathan Anderson announced the closure of Hindenburg Research but did not specify a reason for the decision.

Hindenburg Research which set off a firestorm in India with withering allegations against the Adani Group is being disbanded, marking the end of the American short-seller feared for successfully targeting dozens of corporations.

Nathan Anderson, who founded the research firm seven years ago, announced the closure but did not specify a reason for the decision.

Hindenburg Research became a household name in India after accusing the Adani Group of “pulling the largest con in corporate history," in January 2023. Despite Adani Group's strong denial and rebuttal of the allegations, the group's market value slumped over $150 billion in the first half of 2023. However, it has clawed back most of the losses since then.

Also read | Adani Group adopts strategy to diversify its debt after Hindenburg crisis

Jugeshinder “Robbie" Singh, chief financial officer of Adani Group, posted a message on X, seen as a dig at the short-seller that hounded his group from distant shores but failed to bring it down.

“Kitne Ghazi Aaye, Kitne Ghazi Gaye (Many invaders have come and as many have perished)," Singh wrote, which appears to be a tongue-in-cheek response to the closure of the New York-headquartered firm.

Hindenburg’s allegations had sparked a political slugfest between the ruling Bharatiya Janata Party and the opposition Congress, with both sides taking potshots at each other. Congress alleged that the ruling party was favouring the Ahmedabad-based conglomerate, while the BJP attacked Congress for destabilizing the economy.

Earlier in the day, Anderson, 40, announced the closure of Hindenburg Research, which he had set up in December 2017.

“As I’ve shared with family, friends and our team since late last year, I have made the decision to disband Hindenburg Research," Anderson wrote on his blog. “I write this from a place of joy. Building this has been a life’s dream," said Anderson, who did not share a reason behind closing his venture, which had emerged as one of the most prolific, feared, successful and controversial among short-sellers.

“There is not one specific thing—no particular threat, no health issue, and no big personal issue," said Anderson.

A message sent to Anderson seeking comment went unanswered.

Also read | Mint Explainer: Why real estate investment trusts are in Hindenburg’s crossfire

Short-sellers on the back foot

“This news surprised me," said Nitin Mangal, a Mumbai-based independent analyst, arguably one of the first equity researchers in India to face corporate blowback. “Some of Nathan’s work has been fantastic. We all learned a lot of things. But then everybody, whether the regulators or authorities, looks at short-sellers as part of some bad gang. So, it takes a toll," said Mangal, who runs Trudence Capital Advisors Pvt. Ltd, a Sebi-registered research firm.

In the late 2000s, while working for Veritas Investment Research, a Canadian firm, Mangal wrote stinging reports on many Indian companies, including Reliance Communications Ltd, DLF Ltd, and Indiabulls Group. In 2012, Indiabulls filed a police complaint, beginning his decade-long fight with the authorities. Mangal also spent some time in jail on charges of extortion and forgery.

However, unlike Mangal, who only released reports on which investors could make their own decisions, Anderson’s firm shared reports with hedge funds before they were made public. This allowed the hedge funds to bet on the stock's fall, and Hindenburg profited by getting a fee.

In the Adani case, the Securities and Exchange Board of India (Sebi) found that Hindenburg had collaborated with Kingdon Capital, a New York-based firm. Hindenburg did not respond to a Sebi notice to Hindenburg seeking a reply.

"Globally, there is excessive scrutiny on short-sellers," said Mangal. "To make things worse, India is a challenging place for critics. Also, making money is difficult since the country does not allow naked short-selling," said Mangal. Naked short-selling refers to selling stocks without owning or borrowing them.

Short-sellers have been on the back foot. In early 2022, US hedge fund boss Bill Ackman said he would no longer take part in short-selling campaigns that made his Pershing Square Capital Management a feared name. 

In November 2023, Jim Chanos shut Kynikos Associates, after waging bets against companies for nearly four decades. Chanos said markets are either overpriced or fraudulent. Last year, Andrew Left, a short-seller who founded Citron Research, was charged by the Securities and Exchange Commission with market manipulation. Left has denied the charges.

Hindenburg's 'stupendous feat'

According to an executive and a review by Mint, Hindenburg published 85 reports in its seven years of existence, translating to one monthly report. The research firm got it correct about 81% of the time.

Also read | Emboldened Hindenburg’s profit score has gotten better as it targets bigger guns

"This is a stupendous feat," said a New York-based analyst who worked with Anderson before he set up Hindenburg. "Most short-sellers cannot claim to have a success rate of more than 30%."

Three of these 85 reports were related to Indian companies. The first was on Eros International Plc, the New York Stock Exchange-listed subsidiary of the Indian movie production firm Eros. In 2022, it poked holes in Ebix, the Nasdaq-listed parent of Indian fintech company EbixCash, which facilitates payments, foreign exchange and prepaid gift cards.

Finally, in January 2023, it released its stinging Adani report. In 2024, Hindenburg also questioned if the personal investments of Sebi chair Madhabi Puri Buch and her husband in an offshore fund, which Gautam Adani's brother used to manipulate his company's stocks, was the reason behind the Indian market regulator's silence in investigating the Adani Group.

Buch has denied all the allegations.

"Hindenburg's work was inspiring, and I learned a lot," Amit Mantri, managing partner, 2Point2 Capital Advisors LLP, a Portfolio Management Service firm, said on X. "I hope you still continue this work in maybe another form. Time for the crooks and fraudsters to party."

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