Who is Hindenburg? Gautham Adani has lost billions to allegations by a short seller

Hindenburg is back in the headlines after he accused Indian conglomerate Adani Group of “brazen stock manipulation and accounting fraud” last week. It cited two years of research, including interviews with former Adani executives and reviews of thousands of documents.

The Adani group has blasted the allegations, calling them “a malicious combination of selective misinformation and outdated, baseless and discredited allegations that have been examined and dismissed by India’s highest courts”.

Still, Hindenburg’s searing allegations have seen Adani Group founder Gautam Adani’s fortune dwindle by nearly $47 billion in just over a week, according to the Bloomberg Billionaires Index. Here’s a look at the company behind all of the movement:

What is it?

Hindenburg says it specializes in “forensic financial research.” In layman’s terms, it looks for corruption or fraud in the business world, such as accounting irregularities and bad actors in management.

Hindenburg has even become known in some circles as a Ponzi hunter, according to The Washington Post, which detailed how she helped take down an alleged $500 million scheme that targeted Mormons.

Where does the name come from?

The company views the Hindenburg, the airship that famously caught fire in the 1930s while exclaiming “Oh, mankind,” as “the epitome of an entirely man-made, entirely preventable disaster.” It says it is looking for similar disasters in financial markets “before they attract more unsuspecting victims.”

Who else was Hindenberg pursuing?

It’s perhaps best known for a 2020 report on Nikola, a company in the electric vehicle industry whose founder Hindenburg said he’s made misleading claims of forging partnerships with leading auto companies hungry to catch up with Tesla.

Among his allegations, Hindenburg accused Nikola of staging a video to calm skepticism about his truck, one showing the vehicle on a road. Hindenburg said the video actually only shows the truck rolling down a hill after being towed up.

What happened to such allegations?

For Nikola, a quick scrutiny by the government and investors.

Shortly after Hindenburg released his report, the company and its founder, Trevor Milton, received grand jury subpoenas from the US Attorney for the Southern District of New York and the NY County Attorney’s Office.

The Securities and Exchange Commission soon issued subpoenas on Nikola’s directors as well.

Milton was convicted last October over allegations that he misled investors with exaggerated claims about his company’s progress in making 18-wheel zero-emission trucks that run on electricity or hydrogen.

And Nikola agreed in late 2021 to pay $125 million to settle SEC fees it had defrauded investors by misleading them about its products, technical advances, and commercial prospects.

What does Hindenburg get out of it?

It can make money. In its Adani report, it said it had taken a “short position in Adani Group companies” through US-traded bonds and other investments traded outside India.

It has made similar “short” bets against other companies about which it has published unflattering reports. A “short” trade is a way for someone to make money when an investment’s price falls. After that, if the price of a company’s stock or bond falls due to the report’s negative attention, Hindenburg can profit.

Such short sellers have been criticized for unfairly depressing stock prices with potentially unfounded allegations. But proponents also call them a healthy part of a stock market, keeping stock prices in check and preventing them from going too high.

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