Hindenburg, which targeted Adani, to shut down; what comes next?

Nathan Anderson, the founder of activist short-selling firm Hindenburg Research, is closing down operations seven years after establishing the firm. Hindenburg, known for its meticulous reports and bold accusations against major corporations, shook India’s financial landscape with its allegations against the Adani Group in 2023.

Also read: Hindenburg report combination of misinformation, discredited allegations: Adani

“The plan has been to wind up after we finished the pipeline of ideas we were working on,” Anderson wrote in a statement on Wednesday (January 15). He described the job as “rather intense, and at times, all-encompassing”.

Hindenburg had just 11 employees

Anderson’s Hindenburg, which had a total employee strength of a mere 11, had become a high-profile activist short seller on Wall Street, known for meticulously detailed reports and relentless pursuit of companies he alleged were committing fraud, The Financial Times report quoted him as saying.

Also read: No shell company in Mauritius; Hindenburg allegations false, baseless: Mauritius minister

His rise came when some of his peers were no longer interested in growing their businesses because of a decade-long bull market and the growth of passive investment funds that made it difficult to go against the grain. Renowned short seller Jim Chanos told investors he was closing his short-focused funds in November 2023 after more than three decades in the industry. The report said that Bill Ackman, famous for a costly campaign against Herbalife, swore off the practice entirely. A short-seller is an investor or trader who makes money by betting that the price of a particular stock or asset will go down.

Adani's cases against Hindenburg

It remains to be seen whether the Adani Group, which had filed a series of cases against Hindenburg following the allegations against its group, will continue to do so.

Also read: Hindenburg effect: Adani halts work on Mundra, Gujarat petrochem project

Hindenburg had also alleged in August 2024, that the Indian market regulator chief Madhuri Buch and her husband, Dhaval Buch, had financial ties to offshore entities associated with the Adani Group.

In January 2023, Hindenburg, the US-based short-seller, published a report accusing the Adani Group of engaging in widespread stock manipulation, accounting fraud, and the improper use of offshore entities. These allegations targeted the financial practices of a business empire that spans sectors like infrastructure, power, ports, and renewable energy, led by Gautam Adani, one of the world’s wealthiest individuals.

Hindenburg's allegations against Adani Group

Hindenburg's report was notable for its comprehensiveness and gravity. It claimed that the Adani Group’s meteoric rise in valuation and market capitalisation was built on dubious practices. According to the report, shell companies based in tax havens were allegedly used to inflate stock prices and manipulate market perceptions. It also alleged that the Adani Group carried a heavy debt burden that could pose significant risks to creditors and investors.

Also read: All about Hindenburg Research

The fallout was swift. Within days, the Adani Group's listed entities lost billions of dollars in market value as stock prices plunged. Investors were rattled, and international scrutiny intensified. The group denied all allegations, terming the report a calculated attack on India itself, attempting to conflate its business interests with national pride. The Adani Group also issued a 400-page rebuttal, accusing Hindenburg of ulterior motives and a lack of understanding of Indian laws and regulations.

This controversy also drew attention to the role of regulatory oversight in India. Critics questioned whether existing frameworks were robust enough to prevent such alleged financial misdoings. The Securities and Exchange Board of India (SEBI) initiated investigations, while the Supreme Court of India constituted an expert committee to examine the claims.

Anderson’s parting gift

Beyond the financial realm, the controversy also had political dimensions. Gautam Adani's perceived closeness to the Indian government led to criticisms from opposition parties, who used the allegations to target the ruling establishment. They demanded greater transparency in the dealings between the government and the Adani Group.

Also read: Hindenburg’s claims on SEBI chief ‘mischievous’, ‘malicious’: Adani Group

Despite the turmoil, the Adani Group managed to secure funding from international investors and announced measures to reduce debt and boost transparency. This resilience, coupled with the ongoing investigations, has kept the story alive in both financial and political circles.

Activist short selling is a notoriously difficult business that big Wall Street institutions typically shun. Despite all of the challenges, supporters see short sellers as necessary to balance out market euphoria. Hindenburg was prolific, often targeting several large companies at once, a level of intensity that appears to have become too much for Anderson, the Financial Times report said. “It has come at the cost of missing a lot of the rest of the world and the people I care about,” he wrote in a letter published on Wednesday. “It wasn’t always apparent to me, but I now view all of this as a love story.

“We have all worked extremely hard, focusing on precision and letting the evidence dictate our words,” Anderson wrote in the Wednesday announcement. “Sometimes this meant taking big swings and taking on fights much bigger than any of us as individuals.” Anderson’s parting gift for his followers was a YouTube link to a DJ set played in Bali. “It had a big impact on me at a pivotal time,” he wrote.