Prior to taking on Adani Group in January this year, Hindenburg Research was unknown quantity in India, although it was popular among short selling communities in the US.

But then you sometimes become famous by duelling with someone famous, and by doing that in India, Hindenburg made quite an impression.

It not only upped the ante with the Adani Group, but also targeted companies across the globe.

After starting the year with a bang, how has Hindenburg fared? Of the 13 listed stocks (seven from Adani Group) that the forensic short seller targeted in its research reports in 2023, 11 were down – and in many cases quite significantly – in the first one month after the report.

In India, Adani Total Gas, Adani Energy Solutions (formerly Adani Transmission) and Adani Green Energy were down the most in the range of 70-80 per cent. In the US, the investment company Icahn Enterprises – run by famed activist investor Carl Icahn – was down by 57 per cent, while Golden Heaven Group Holdings, a Chinese company, was down by a staggering 92 per cent.

Thus, it is quite clear Hindenburg has a debilitating impact on the target companies in the short term.

At the same time, beyond the initial month also the impact remains, although Adani Group stocks have recovered strongly from the lows.

Fighting back

While a few companies like Golden Heaven, Tingo Group and Icahn Enterprises have taken a permanent hit after the attack by Hindenburg, Jack Dorsey’s Block Inc and the Adani Group companies have overcome the allegations. While all the Adani Group stocks have bounced back, some like Adani Power and APSEZ are above the levels at which they were just prior to the report.

It would be interesting to note that these two stocks were also not highly valued like the rest at the time of the report.

Compared with APSEZ and Adani Ports trading at a trailing PE of 34 and 21 times at the time of the report, the other group companies were trading in the range of unsustainable (even factoring growth prospects) 80 to 800 times earnings!

Excessive valuation likely made these stocks more susceptible to allegations.

This apart, one factor that may have made the allegations against Adani Group less impactful for the long term is that it involved aspects outside the company (i.e stock price manipulation, violation of certain laws, etc) rather than on business or accounting side.

While there were some allegations on accounting irregularities by Hindenburg on Adani Enterprises, this pertained to a period that was almost a decade back (2013).

Compared with this, reports targeting other companies this year delved into instances of fraudulent accounting, fabricated financials and faking business activities, etc.

Other companies

To this extent, Hindenburg got big validation on one of its highly impactful research from earlier years when the founder of Nikola Corporation (exposed by Hindenburg) was sentenced last week for defrauding investors.

Another validation was in the freezing of assets by the US SEC of an unlisted entity called ‘Nanban Ventures’. Hinderberg exposed the entity through a report titled ‘With Friends Like These…’ — a humorous take on the word nanban which means friend in Tamil. Nanban Ventures is allegedly a ponzi scheme targeting the Indian American community.

Hindenburg claims that it had first alerted SEC on this earlier.