Evidence that Adani Group has engaged in stock manipulation and accounting fraud
hindenburgresearch.com
hindenburgresearch.com
I dont like the idea of 'This seems fishy so let's bet against it'. If something feels fishy stay away from it as much as possible. Michael Burry doesn't happen every day.
What do you mean? I struggle to understand how betting against a company is "doing business" with them, it seems even less like "doing business" than having no relationship at all. You are actively signaling you expect them to fail.
If the company completely disappears tomorrow, your short will be profitable.
Unless you have expertise that it's not that simple? Or a source saying otherwise? (Not an attempt to be snide, but an honest opening for counter evidence, I'm not an expert in this).
See https://www.reuters.com/article/muddy-waters-asia-short-sell...
What you are betting on in a short position is for the company to continue to exist, but at a lower valuation.
Gautam Adani is a Gujarati impex trader who won the lottery when his pony won the parliamentary race.
I would argue both families are extremely different, even if they seem culturally similar on the outside. That being said, I would say there are parallels to Gautam Adani and Dhirubhai Ambani (Mukesh's father, for those ootl).
1) The Ambanis didn’t exist when the Ambanis were rising. This is similar to how everyone wants to be the next Amazon, ignoring the little fact that unlike when Amazon was growing, there already is an Amazon now.
2) The Ambanis were able to ride a wave of massive growth post liberalization to cover up their illegal dealings and essentially become legitimate. It’s not clear that there is any such wave of massive growth available to the Adanis to cover up their illegal dealings.
3) The Ambanis raised money illegally almost entirely locally, which meant they avoided international scrutiny, and they did so at a time when the Indian financial agencies were simply not mature enough. The Adanis will be raising foreign funds which increases scrutiny, but also Indian regulatory agencies are far more mature at this point.
4) The Ambanis valuation did collapse dramatically for a significant period of time. The difference is that the business has been split between the 2 brothers and one went to almost 0, while the other grew slightly. Their combined wealth, simulating the market cap of the company, has declined drastically from its peak level.
I love short sellers, Citron did a little sting in my city, Hong Kong, trying to short Evergrande with an A to Z demonstration of how it was ponzinomics, to end up being sued by our regulator for stock manipulation and being condemned years later finally to not trade in HK for years. A little while later, Evergrande's Ponzi finally collapsed. Nobody here bothered to disprove the claim, they only cared about the share price dropping too fast.
Any company claiming short sellers are evil are lying to you: they d simply buy back the shares at a discount, if they were so sure of themselves.
It could be manipulation in principle, but the instances where regulators have been corrupted and use that as an excuse are really terrifying. See: Wirecard in Germany.
They never explained and the stock never went back down to 20.
Citron is definitely part of the scamming. The fact that a scammer (Citron) scammed another scammer (Evergrande) doesn't make them good guys.
If it's illiquid - you don't.
Jeopardy with market crashes isn't that you'll be forced to sell your stocks low but that there will be no one to sell to and you'll sit on assets devaluing to zero or close.
Maybe the company being vaporized is always a risk of shorting though, not a finance guy so I have no idea.
why is that a risk tho? If you shorted something, the money is already in your hands (aka, you "sell" short presumably, where you make a buck selling it now, and have to put up cash in the future to make the short whole).
If in the future, the company vaporized, then wouldn't you no longer owe the shorted stock?
Even if your investment strategy is sound, if in the short term, you on paper owe stock that is "worth" billions of dollars, the institutions that you are owning this paper billions of dollars too, could be unwilling to just trust that you will be able to pay it.
Thus, they bake in contractual provisions, such as margin calls, which require you to automatically sell/buy the stock back, if you ever reach certain loss limits. Thus, forcing you to accept the loss now, even if your long term strategy is hypothetically profitable.
Or, at least that is the simplest/most common ways that this work. I am sure that margin calls are more complicated than that, for large financial institutions.
In recent memory, this has happened to Longfin Corp. [0], Cynk Technologies [1], China Biotics [2], and surely others. If it does happen before you can close out a short position, that's bad. You can be stuck that way for years [3].
[0] https://www.sec.gov/enforce/information-longfin-investors
[1] https://www.sec.gov/litigation/suspensions/2014/34-72594.pdf
[2] https://www.sec.gov/litigation/opinions/2013/34-70800.pdf
[3] https://www.barrons.com/articles/getting-caught-short-152306...
There are relationships with Indian banking giant ICICI that are questionable and that also cross continents.
And more (it's big wall map tiny font material here).
Point being, shaking up the Adani Groups reputation has flow on effects that can be capitalised upon in many ways by shorting many other associated companies that may fail due to governments losing confidence to proceed on large projects, choosing other partners, etc.
If the stock is near zero and you have a contract to sell at $5 - that's profit.
So in so far as you have technical concerns about the risks of not getting completely paid on your short position if you have a borrow on a delisted bankrupt company whose shares are tied up in litigation, the market maker will have the same concerns about the same arcane risks and will pass the cost on to you in the form of a worse price on your option.
It might still be a better way for you to make this trade - the options trader has a whole settlement team to figure this out - but it's a service you're paying for.
https://www.bloomberg.com/opinion/articles/2018-04-11/-go-to...
https://www.reuters.com/article/muddy-waters-asia-short-sell...
1) Adani is very close to the current ruling party and the PM - deploying his extensive business network and assets (in various forms) to help get the PM elected (2014) and then re-elected. A bit of googling will reveal the vast scale of politico-corporate nexus between these two - extending all the way back to when they were chums in Gujarat - the Indian state of the PM
2) The only reason the Adani Group has not been hauled up in-front of multiple regulators and law-enforcement agencies on a constant basis is because of #1 above
3)Adani ports seem to be curiously immune to investigations despite literal TONS of drug seizures [1]
4) There were multiple stories of forced resignations being used by the companies across its workforce to trim costs during the pandemic and avoid paying hefty severance per India's strict labor laws
5)A lot of the public sector banks in India are purported to be under pressure to not recall loans or issue fresh loans on demand to him - essentially a federal backstop to all his liabilities - enabling crazy levels of debt
[1] https://www.ndtv.com/india-news/adani-ports-says-its-termina...
It's fairly simple for the government to bail him out. They already did that to Anil Ambani. It doesn't even have to be a direct payout, there are always 'projects' you can give and pay them some 1000% extra money compared what it would otherwise cost. In other words a government(tax funded) bailout is easily doable and will be done, when the need arises. In many ways the party is just giving money to itself(Electoral bonds).
Just to complete the argument, don't expect any backlash against the government either. The current ruling party enjoys nearly 'no prior conditions' based support from their constituency regardless of whatever they do, no matter big a disaster unfolds. And this is going to be the case for the foreseeable future(think decades).
To summarise, whatever fraud this is, no matter how big the impact of this on the Indian economy. In fact even if takes down the whole set up with him. He is just going to emerge from this fine. And the government will bail him out without any consequences for them.
I'm reminded of this: https://www.economist.com/asia/2022/12/20/can-indias-richest... / https://archive.is/zPgHY
> Many of the slum’s thousands of cottage industries, which churn out textiles, leather and metal goods by the truckload, will also be relocated within Dharavi’s boundaries, even if they may have to downsize. Those considered to be polluting will be excluded. Whatever former slumland remains will be for Mr Adani. Superbly located on three suburban railway lines, an upcoming metro line and adjacent to Mumbai’s prime commercial district, it could be worth 30,000-40,000 rupees ($360-480) a square foot at today’s rates, reckons Gulam Zia of Knight Frank India, a property firm.
Pretty much everyone wants a government job, or any job where they can make money through bribes. Major Indian cities run dozens of coaching class cram schools to prep people for civil services jobs. Becoming corrupt is an aspirational thing in India. This is an elephant in the room nobody wants to discuss. Your ordinary Indian walking on the street deeply aspires to be corrupt. Only thing next to this is the desire for managerial jobs in private firms. Because this is how you get by life giving orders and not doing any work.
The only reason why the protests against the previous governments was so intense was not because of corruption. The overall polarising movement that started in the 1980s from the destruction of Babri Masjid means there is a long running and developing trend among India's electoral masses to consolidate on the lines of religion. This means other things aren't all that important. This also means to win elections, you need money from all these big corporate payers. Their corruption goes ignored, and in many is even perfectly acceptable.
If an ambitious, energetic kid is born in a slum or some backward area and doesn't see legitimate ways to access resources/climb the ladder, chances are very high the kid will take shortcuts. That's the nature of high energy, ambitious people. These people, purely based on the drive they have, influence the behavior of the rest that surround them.
When such people are identified early, and given the right guidance/resources the outcomes are totally different.
They have been suing a climate activist here for millions of dollars, and as part of it they had private investigators following him, his wife, and his children, including photographing his children while they were alone on the way to and from school. They were “unapologetic” [2].
Although from what I read of Adani’s human rights abuses overseas (such as forcing native tribes off their lands to build mines and infrastructure, and complete disregard for the environmental effects of their operations poisoning nearby communities’ air and water/food sources) this is a tiny drop in the bucket of that company’s scummyness.
1. https://cdn.getup.org.au/2061-2059-The-Adani-Files.pdf
2. https://www.theguardian.com/business/2020/oct/28/private-inv...
They're also fully trans national scumbags and haven't limited their bad behaviour to just India and Australia, they don't mind a contraversal resource | energy project or three.
Infuriating.
They'd been voted in I think because there was desire for change, and very quickly the public sentiment changed. Kind of like "oh crap, not like this"... It's very unusual for a Government to only have one term but they were booted out decisively. Since then the party seems even less competent... So they haven't been able to make much of an impact in the last few elections.
I guess once you've spotted a scummy Indian mining company you start to see them all over?
Non-Indian[1] mining companies operate in a similar way. When the mines they operate are in the global south, political and indigenous opponents to them have a habit of ending up in pieces.
Oh, it's not the executives in Toronto that are ordering organizers murdered and stuffed into oil drums - it's just the problem-solvers that their overseas branches happen to employ...
[1] https://justice-project.org/the-canada-brand-violence-and-ca...
That said, shitty behaviour in the "global south" (or towards indigenous land holders enclaved with the US, Canada, or Australia) is common enough across the board no matter the nationalities of majority owners and board members.
(too long for HN post title, mea culpa, feel free to change it up dang)
"Nobody thought the sales were real" LMAO
https://www.youtube.com/watch?v=n0Y81M8oWn4 (make sure you watch the ending)
[1] https://www.screener.in/company/ADANIENT/consolidated/#share...
I'm trying to find the (sigh) "Largest Con in Corporate History" promised in the headline. All I'm finding is accounting games and market cheating? I mean, these are routine crimes. In the US, the SEC prosecutes dozens of these every year (maybe it's easier to get away with it in India). Maybe there's an argument that the scale here is larger? If so the numbers aren't in the article.
1. A highly illiquid asset that's mostly owned by the founder
2. Price manipulation to artificially inflate the asset price
3. Mark-to-market accounting to artificially inflate the market cap
4. Using the inflated market cap to justify borrowing billions in liquid assets
5. A downturn in the market and... the money's gone
https://www.theguardian.com/australia-news/2022/nov/29/still...
[1] https://www.forbesindia.com/blog/economy-policy/india-maurit...
https://timesofindia.indiatimes.com/news/fleet-of-3-aircraft...
It's exactly (in content) what I wrote to my friends while we were discussing this in WhatsApp.
"If push comes to shove RBI could well bail out Adani through some complicated deal....they'll bail out LIC and SBI for sure...through those entities I meant not directly"
But that may not protect him from a market run...
besides the shady ways of raising initial capital, the main crux of the issue with the rise of both Ambani and Adani empires rely on getting favours from local administration. Adani was able to catapult to a big position in the country because of winning contracts from the state administration when the current PM was the CM of the state.
for now, this remains the reality for those who want to set up conglomerates in the country, especially involving infrastructure and commodities.
Surely, they will try to subvert the indian government and take over local giants to establish a construct similar to the ccp to engage in rampant proxy colonialism.
Also, he might be a 3rd richest person on paper, but I call him a flight risk. Once Modi govt is kicked out, he’ll flee India, just like other scammers like Nirav Modi and Vijay Mallya.
What has started, is bound to end one day!
However this guy and his family members are pretty well connected and would be fine as long as Modi is India’s PM. In fact it is even stated that this guy is basically a kingmaker as his massive inflated fortune funds the political contributions to the ruling BJP party.
But that's a high bar I assume...
If the rest of the world weren't also so corrupt, it'd be fairly trivial to call out Adani and cancel all business with them and add some nice sanctions, but that's not the world we're in it seems.
But yes, that is exactly what Hindenburg does – not sure if GC thinks shorting companies you think are frauds is a bad thing or what – as far as I'm concerned it is the best reason for shorts to exist! I'd have more questions if Hindenburg wasn't shorting Adani Group after this report.
Not only was he a highly successful field marshal on the Eastern Front in WWI (after being brought out of retirement to replace the panicking previous commander there), he later became de facto dictator of Germany for the remainder of the war (until it was time to surrender, then he threw the dumpster fire over the wall to the civilian politicians). (Of course as his second, Ludendorff, wouldn't miss to tell anyone after the war, Hindenburg's role was more one of moral authority, calming presence and coordination, the actual war plans being made by the people under him, most notably Ludendorff who was really pissed after the war Hindenburg took all the credit).
However he's even more interesting after WW1, when his popularity brings him to being elected as President, being in de facto control of Germany again thanks to a constitutional workaround, and then working to stop Hitler from getting to power before finally being convinced to give him the chancellorship. After his death, Hitler also took over the presidentship, and that was that. So Hindenburg was the only man who could stop/delay Hitler from taking power, and he failed.
(It's a less great thing that fraud of this sort is possible, and that falsely accusing others of fraud can happen too)
While such firms certainly have an incentive to make the company they've shorted look bad, it turns out that it works best (and is easier) when the company they short actually is bad. Thus, they've found a way to make a business out of identifying frothy financial bubbles built on shaky-to-fraudulent fundamentals and popping them.
It's kind of a public service in the sense that it corrects the market when it goes awry and ultimately they are betting their own money that their investigation is correct.
But for instance in the case of "there's a new plague and China is locking down" there were several months between first hearing about it and everyone recognizing it.
If the report is true, there maybe insufficient market capacity for the stock to move freely, any short position - including the one that Hindenburg made maybe blown up by determined opposition.
Haven't seen many "manufactured fraud" allegations. In my experience the research is often quite in-depth and they tend to be proven correct in the end.