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Hindenburg Research Takes On Adani Group

Nathan Anderson has become known for his stock analysis, which has caused many stocks to drop in value.

January 26, 2023
3 minutes
minute read

Nathan Anderson has become known for his stock analysis, which has caused many stocks to drop in value.

Now the activist short seller behind Hindenburg Research is targeting his biggest game yet - what Hindenburg is calling, with characteristic audacity, "The Largest Con in Corporate History."

The target of his ire is Indian industrialist Gautam Adani, whose net worth is an estimated $113.4 billion, according to the Bloomberg Billionaires Index. This makes him even richer than Bill Gates or Warren Buffett.

Hindenburg Research has released a report detailing what it alleges is a pattern of stock manipulation and accounting fraud by the Adani Group, one of India's largest conglomerates. The report, which is based on a two-year investigation, alleges that the Adani Group has engaged in a range of fraudulent activities dating back decades.

The Adani Group has dismissed a recent report as "maliciously mischievous" and "unresearched." The report has caused Adani's empire to lose $12 billion in market value and has triggered a selloff in dollar bonds.

Hindenburg is hopeful that this is just the beginning. Adani says they are exploring legal action.

This is a remarkable turnaround for Anderson, who first caught Wall Street's attention with his criticisms of electric vehicle makers Nikola Corp. and Lordstown Motors Corp. Little Hindenburg has never taken on a company as large and powerful as Adani Group. (Anderson briefly bet against Twitter Inc. when Elon Musk was buying the company, but then turned bullish on the stock last July.)

The question is whether other investors will heed Hindenburg’s warnings about Adani, whose wealth cuts across India’s economic and political life.

This fight is very one-sided. Gautam Adani has spent four decades building a business empire that includes energy, agribusiness, real estate, and defense. He is considered to have a close relationship with India’s Prime Minister Narendra Modi, and his goals are closely aligned with the government’s priorities. The Hindenburg report came out just as Adani Enterprises was opening a $2.5 billion share sale for investors.

Anderson's firm is based in New York and is less than five years old. The firm wagers its own money in the markets and is not a hedge fund with outside investors. Even in Manhattan's financial circles, Anderson is not a big name.

Anderson has managed to make a mark lately with Hindenburg. The company has targeted about 30 companies since 2020, and their stocks have fallen an average of 15% the next day. Six months later, the stocks were down 26%.

Anderson declined to comment on the story. However, Hindenburg is preparing for a detailed response from the Adani Group.

Short sellers have been a controversial presence in the world of stocks for centuries. In the 1600s, the Dutch East India Company became the first company to issue shares, and traders began shorting the company's stock. The Dutch government eventually outlawed the practice. In recent years, US authorities have investigated whether some short sellers have colluded to attack companies. Hindenburg Research has not been accused of any wrongdoing, but some of its peers have been sounding the retreat.

Hindenburg's method is simple. Anderson and his team investigate companies and look for wrongdoing. One well-known example is electric-vehicle maker Nikola, which Hindenburg called an "ocean of lies." Last October, Nikola founder Trevor Milton was found guilty of deceiving investors.

Hindenburg may be the loudest voice in the room, but Anderson himself is much more low-key.

He was raised in a small town in Connecticut and got his business degree from the University of Connecticut.

He has lived in Israel for a time during his college years, working as a paramedic while taking classes at Hebrew University. Later, he worked for a financial analytics company before taking a job checking out potential deals for the investment firms of wealthy families. According to him, his passion is to "find scams."

Early on in his career, Anderson spent hours investigating potential Ponzi schemes. He occasionally teamed up with forensic accountant Harry Markopolos, who famously tried to warn federal authorities about Bernard Madoff. Anderson has called Markopolos a role model.

In 2014, Anderson began filing whistleblower complaints with US authorities in an effort to collect bounties for uncovering fraud.

One of his first big stories was investigating hedge fund Platinum Partners with Markopolos. As a result of their findings, seven executives were charged with fraud.

Hindenburg today employs around 10 people, a mix of former journalists and analysts. Sometimes, hedge funds have joined in on its trades.

Even if Adani manages to overcome Hindenburg, Anderson still has a lot of work to do. The odds are in Adani's favor, but Anderson will need to continue to work hard to achieve success.

"There's still plenty of fraud out there," Anderson told the New York Times last October. "If there's ever a time that I feel that most of the corporate fraud in America has been eliminated, then I'll probably announce that I'll go grow tomatoes, or something."
Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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