Hindenburg Research, a financial research firm with an explosive name and a track record of sending its target stock prices plummeting, is taking on one of the world’s richest men.
Hindenburg is back in the headlines after last week accusing the Indian conglomerate Adani Group of “stock manipulation and an accounting fraud scheme.” It cited two years of research, including discussions with former senior Adani executives and a review of thousands of documents.
The Adani Group slammed the allegations, calling it a “combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest court.”
However, Hindenburg’s allegations have caused the fortune of the founder of the Adani Group, Gautam Adani, to slide by nearly $47 billion in just over a week, according to the Bloomberg Billionaires index. Here’s a look at the company behind the whole movement:
What is that?
Hindenburg said it specializes in “forensic financial research.” In layman’s terms, looking for corruption or fraud in the business world, such as accounting irregularities and bad actors in management.
Hindenburg has even been known as a Ponzi hunter in some circles, according to the Washington Post, which details how he helped fund a $500 million scheme targeting Mormons.
Where does the name come from?
The company said it saw the Hindenburg, the famous airship of the 1930s with its cry of “Oh, humanity,” as “a symbol of man-made and avoidable disaster.” He said look for similar disasters in the financial markets “before luring more unsuspecting victims.”
Who else did Hindenberg do?
It is perhaps most famous for its 2020 report on Nikola, a company in the electric vehicle industry whose founder Hindenburg said made false claims to form a partnership with a top car company hungry to catch up to Tesla.
Among the accusations, Hindenburg accused Nikola of making a video to calm skepticism about the truck, which showed the vehicle running on the road. Hindenburg said the video only showed the truck going down the hill after it was pulled up.
What happened to the allegations?
For Nikola, quick scrutiny from the government and investors.
The company and its founder, Trevor Milton, received grand jury subpoenas from the US Attorney’s office for the Southern District of New York and the NY County District Attorney’s Office shortly after Hindenburg issued his report.
The Securities and Exchange Commission also soon issued a subpoena to Nikola’s director.
Milton was convicted last October of the charge of defrauding investors with exaggerated claims about the company’s progress in producing zero-emission 18-wheel trucks fueled by electricity or hydrogen.
And Nikola at the end of 2021 agreed to pay $125 million to settle SEC charges that it deceived investors by misleading about its products, technical progress, and commercial prospects.
What did Hindenburg gain from this?
It can make money. In Adani’s report, it said it has “short positions in Adani Group Companies” through bonds traded in the US and other investments that trade outside India.
It has made similar “short” bets against other companies that have published disappointing reports. A “short” trade is a way to make money if the price of an investment falls. After that, if the company’s stock or bond prices fall due to negative attention from the report, Hindenburg can profit.
The short sellers have been criticized for unfairly pushing up the share price with baseless allegations. But supporters also cite a healthy portion of the stock market, keeping stock prices down and preventing them from getting too high.
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