Shulou(Shulou.com)11/24 Report--

According to a survey report, the market capitalization of $50 billion has been wiped off. This is perhaps the most successful short hunting in history. "Wolf of Wall Street" this time aimed its fangs at Asia's richest man.

The Wolf of Wall Street hunted last Tuesday night, Hindenburg Research, a New York-based short investor, released an investigation report that identified 88 problems with Indian corporate giant Adani Group and accused the group of "unbridled stock manipulation and accounting fraud over the past few decades".

Adani Group is one of the second largest integrated enterprise groups in India, headquartered in Amudaba in northwest India. Since its establishment in 1988, Adani Group has started from the initial commodity import and export trade, and its business has gradually expanded to energy, ports and airports, mining, food processing, IT cloud computing, real estate and many other fields.

Adani's revenue totaled $23.3 billion last year and includes seven listed companies. Over the past few years, Adani's share price has risen more than fivefold, with a market capitalization of more than $218 billion. As a result, founder Gautam Gautam Adani is worth twice as much.

According to Bloomberg super-rich statistics, the 60-year-old Adani had a personal fortune of more than $120 billion at the beginning of January, surpassing his old rival Mukesh Ambani to become the richest man in Asia and the third richest man in the world, even surpassing Bill Gates and Buffett.

However, Asia's richest man and Indian tycoon were thus embarrassed by the Hindenburg shorting report. Adani shares began to fall last Wednesday, but the Indian stock market was closed last Thursday for a holiday. The real sell-off came on Friday, when Adani lost nearly $40 billion in market value in a single day, and the shares of its listed subsidiaries, such as energy and transportation, tumbled by about 20 per cent. Adani himself gave up the throne of Asia's richest man because of the sharp fall in share prices.

To make matters worse, the Hindenburg short report was released at a time when Adani was at its most critical fund-raising period. The Indian giant plans to raise $2.5 billion in new shares this month and began a formal offer on Friday. Due to the influence of the short report, underwriters are already considering lowering the offering price, and retail interest is very low.

According to media reports, India's financial regulator is studying the Hindenburg study to find possible problems with Adani's holdings in offshore funds, and may launch its own investigation. Over the past two years, Adani has entered the vision of India's financial regulators.

In response to the Hindenburg short report, the Adani Group said angrily that it was groundless and malicious shorting, and they threatened to take legal action against Hindenburg. Adani CFO Singh (Jugeshinder Singh) said in a statement that the report was "a malicious combination of selective misinformation, outdated and baseless allegations. The timing of this report is clearly intended to deal a blow to Adani's goodwill, mainly to undermine Adani Enterprises's public offering."

Hindenburg also responded forcefully, not afraid of litigation and believing that their short reports were based on facts. "if Adani is serious, a lawsuit should be brought in the United States where we live. In the legal process, we have a long list of legal documents required."

What exactly did Hindenburg find out about the Adani Group? It took Hindenburg two years to interview dozens of people familiar with the matter, reviewed a number of documents and completed the investigation into Adani, the study said. Hindenburg found that the Indian corporate giant used tax havens offshore entities in places such as Mauritius and the Caribbean islands, and that some offshore funds and shell companies had secret transactions with Adani's listed companies.

Hindenburg also said in the report that five of Adani's seven listed companies had liquidity ratios of less than 1, a measure of current assets and short-term liabilities, meaning "increased short-term liquidity risk". In addition, the key listed subsidiaries of Adani Group have "a large amount of debt", which puts the whole group in a "dangerous financial situation". Hindenburg even bluntly pointed out that, in terms of fundamentals, the seven listed subsidiaries of the Adani group are overvalued and have up to 85 per cent downside.

Four days after the release of the Hindenburg short report, Adani issued a 413-page formal response today, saying it had complied with all Indian financial company laws and made all necessary regulatory disclosures. "Hindenburg is a short seller whose report is full of conflicts of interest, but is intended to create false information in the securities market and obtain huge financial gains at the expense of countless investors."

Shorting 16 companies in five years

Us hedge fund billionaire Bill Ackman has also joined the debate. He said on Twitter that he found the Hindenburg investigation highly credible and well-researched. "We didn't invest long or short Adani, and we didn't do our own independent research on it," Ackerman stressed. "

Over the past few years, Hindenburg has gained a reputation on Wall Street for a series of short selling. They use their own funds to short trades and issue research reports to suppress the share prices of target companies. In the past five years, Hindenburg has shorted at least 16 listed companies, including new energy vehicles Nikola, Lordstown, Mullen, medical services company Clover Health and blockchain company SOS.

Hindenburg is Nathan Anderson (Nathan Anderson) founded in New York in 2017, specializing in stocks, credit and derivatives investment. Hindenburg is named after the German spaceship Hindenburg that crashed in a tragic fire over New Jersey in 1937, killing a total of 36 people.

Hindenburg's short report comes not only from their own public data, but also from many inside revelations. In order to obtain valuable information, Hindenburg is even willing to offer a high reward for revelations. In 2021, Hindenburg announced a $1 million reward for the Tether peg to the dollar and the internal financial information of the company behind the stable currency.

Anderson named his investment agency Hindenburg to emphasize his search for "man-made disaster". Because Hindenburg focuses on shorting, through various public and disclosure channels, looking for audit irregularities, mismanagement and information disclosure problems of listed companies, issuing short-selling reports to suppress stock prices, so as to profit from short-selling. Hindenburg's investment capital comes from self-raised funds.

Hindenburg was not the first to question Adani, they just found eggs that might be cracked. In 2021, the Economic Times of India reported that India's financial regulator froze billions of dollars worth of Adani holdings held by offshore funds. CreditSights, a unit of Huiyu, also reported in 2022 that Adani was too leveraged and that it was risky to rely on high debt to support growth. Adani responded at the time that its leverage ratio was healthy in the industry and had been declining steadily over the past few years.

The report issued by Hindenburg is also aimed at making a profit from the Adani Group. They invested in Adani bonds and financial derivatives in the United States, and Hindenburg could make a big profit if Adani's share price bond prices fell sharply.

This is also the normal pattern of many short sellers on Wall Street. Chinese investors are most familiar with Muddy Waters and Citron, two short sellers that have attacked dozens of Chinese companies over the past decade. Hindenburg also shorted several Chinese companies, including Wins Finance, China Financial Resources Utilization Co., Ltd. (China Metal Resources Utilization), Wuhan Yangtze River Development and other companies.

Some of these short selling operations really found illegal operations, or even fraudulent crimes, so that Hindenburg made a lot of money, while others were refuted, short selling failed, and finally came to nothing.

Sniping Nikola is a classic, but Hindenburg's best-known and successful short-selling campaign is the attack on the new energy car Nikola in September 2020. According to Anderson himself, the short selling has brought handsome returns to Hindenburg, but he did not disclose the exact amount.

In June 2020, Nikola, a new energy vehicle company, went public in a backdoor listing at the height of the US stock market. Nikola uses the concept of "hydrogen energy Tesla". Although it has not delivered a single car, it has a market capitalization of US $34 billion soon after its launch, even surpassing that of the established company Ford Motor. As a result, Nikola founder Trevor Milton (Trevor Milton) is worth more than 10 billion US dollars. He imitates Musk everywhere from startup to product to marketing, and is regarded by the media as "Musk second".

But at the height of Nikola's glory, Hindenburg made a move. On September 10, 2020, Hindenburg released a 67-page study accusing Nikola founder and executive chairman Trevor Milton (Trevor Milton) of falsely promoting Nikola for years and constantly falsifying core technical parameters and product development progress. The study is based mainly on anonymous revelations from Nikola insiders.

Over the next few days, well-known financial media, such as Bloomberg and the Financial Times, followed up to verify the details of the fraud revealed by the Hindenburg short report. Four days later, the Securities and Exchange Commission (SEC) and the Department of Justice launched securities fraud investigations into Milton and Nikola, and investors hired law firms to open fraud lawsuits.

Milton quickly refuted the short report at first, promised to confront the charges one by one, and announced that he would sue Hindenburg for libel. "cowards run and leaders continue to fight," he wrote confidently on Twitter. " But in the following trading days, watching Nikola's share price fall sharply and lose more than half of its market value, Milton did not dare to respond publicly. Ten days after the release of the Hindenburg short report, Milton was forced to resign as executive chairman of Nikola and was eventually kicked out of the Nikola board.

So what lies did Milton tell? Nikola has previously released a commercial showing a hydrogen-powered heavy truck galloping along the desert highway, showing that its semi-trailer truck has outstanding performance and mature technology. But in fact, the truck was just a prototype shell car that could not drive at all and was dragged up the hillside by the truck. This completely fake product advertisement was "created" by Milton himself and released according to his request.

Milton's lies are much more than that. Nikola's so-called $10 billion order for heavy trucks is just the intention of corporate customers, not a real order contract. The partnership agreement between Nikola and GM is actually GM's supply of hydrogen batteries to Nikola, Nikola's release of so-called hydrogen-powered pickups and even revamped GM trucks. GM abandoned its cooperation agreement with Nikola at the end of November 2020 after the fraud scandal was revealed.

There is a lot of evidence that Milton's false propaganda has been unscrupulous. He claims that Nikola can produce hydrogen fuel on its own, and that the cost can be reduced to $4 per kilogram, only 1/3 of that of other hydrogen fuel producers. But Nikola insiders confirmed that the new carmaker simply did not have the technical capacity to produce hydrogen fuel.

At the end of 2021, Nikola agreed to pay a $125 million fine to settle with the Securities and Exchange Commission (SEC). Nikola now has a market capitalization of just $1 billion, a far cry from the $34 billion it had before Hindenburg shorted. Milton, who is lying and lying, is facing prison. In October last year, a federal jury in New York convicted Milton of three counts of fraud. He will formally announce his sentence in June this year.

Making money from Musk Hindenburg is not just a short investment, they occasionally become bulls. In May last year, after Mr Musk announced a deal with Twitter, Hindenburg announced that it was shorting Twitter because they believed that as the stock market fell sharply, Mr Musk could abandon the deal, forcing Twitter's board to accept a lower price. As expected, Musk abandoned the deal on the grounds of a Twitter zombie account.

But instead of softening the price, Twitter's board of directors filed a lawsuit on July 12 last year to force Musk to close the deal. The next day, Hindenburg announced that they had changed from short to long and began to significantly increase their holdings in Twitter's share price, believing that Musk might be forced to buy at the original price. Twitter's share price soared 8% on the day. At the end of October, Musk finally completed the acquisition of Twitter for a total price of $44 billion, as agreed at the end of April.

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