SEBI issues show-cause notice to Hindenburg Research in Adani case
US-based short-seller, Hindenburg Research, has been served a show-cause notice by the Securities & Exchange Board of India (SEBI), the country's capital market regulator. The notice pertains to suspected violations linked to Hindenburg's short bet against the Adani Group. Last year, Hindenburg accused Adani Group of "a brazen stock manipulation and accounting fraud scheme over the course of decades," causing a $150 billion drop in Adani stocks.
Hindenburg responds to SEBI's show cause notice
Hindenburg Research has labeled the show-cause notice from SEBI as an intimidation tactic. The firm stated that the regulator made a "nebulous allegation" of misrepresentations and inaccuracies in their report, designed to mislead readers. Hindenburg dismissed these claims as "nonsense, concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India."
Hindenburg reveals financial details and criticizes SEBI
The 46-page show cause notice from SEBI detailed Hindenburg's relationship with an investor who held a short position in Adani. Hindenburg disclosed it had one investor partner and expected to "barely come out above breakeven" on its Adani short after costs. The firm made $4.1 million in gross revenue through "gains related to Adani shorts from that investor relationship" and just $31,000 from its short position of Adani's US bonds.
Hindenburg criticizes SEBI's handling of Adani allegations
Hindenburg Research criticized SEBI for not mentioning Kotak Mahindra Bank, which created and managed an offshore fund structure used by Hindenburg's investor partner to bet against Adani. The firm suggested this omission was intended to "protect yet another powerful Indian businessman from the prospect of scrutiny, a role SEBI seems to embrace." Hindenburg also claimed that SEBI seemed more focused on pursuing those who expose such practices rather than investigating the allegations against Adani Group.
Hindenburg's original report on Adani Group detailed
Hindenburg's original report was a comprehensive 106-page document with 32,000 words and 720 citations. It detailed alleged stock manipulation and accounting fraud by the Adani Group. The report detailed a network of offshore shell entities allegedly managed by Gautam Adani's brother, Vinod Adani. It also mentioned how billions were moved through these entities into and out of Adani public and private entities without related-party disclosures.
