Who is behind Hindenburg, the research firm targeting the Adani group?

Hindenburg Research’s bruising report accusing the Adani Group of pulling off “the largest con in corporate history” has rattled India’s stock markets.

On Jan. 24, the New York-based forensic financial research firm disclosed its short positions on Adani companies, on the grounds of alleged accounting fraud and “brazen stock manipulation” over the course of decades. This has sent shares of the company spiraling down into a deep red zone in the past two days. So far, its seven listed entities have lost $39.4 billion of value.

Hindenburg Research has a track record of exposing corporate wrongdoings, including those of electric-truck maker Nikola Corporation, and of betting wisely on short and long investments, as it did with Twitter during the social media company’s long takeover drama with Elon Musk.

Hindenburg’s latest report, 106 pages in all, seeks answers to 88 questions related to discrepancies at Adani that it says it found across two years. The group’s chief, Indian industrialist Gautam Adani, is Asia’s richest man, with a net worth of roughly $120 billion.

The conglomerate’s legal head, Jatin Jalundhwala, in a statement on Jan. 26, said the company was “deeply disturbed” by the “intentional and reckless” attempt to tarnish Adani’s reputation ahead of a follow-on public offer that opened today (Jan. 27).

The extent of the damage triggered by Hindenburg’s findings is of widespread importance in India, where several public-sector banks and the country’s trust fund Life Insurance Corporation (LIC) hold large stakes in the company. If Adani collapses, it will hurt taxpayers in a big way.

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What is Hindenburg Research?

Nathan Anderson founded Hindenburg Research in 2017 to analyze the equity, credit, and derivative markets. The name Hindenburg is derived from the 1937 airship explosion in New Jersey that killed 36 passengers.

The firm says on its website that it looks for “man-made disasters,” such as accounting irregularities, mismanagement, and undisclosed related-party transactions. Its stated aim: to uncover corporate disasters before they “lure in more unsuspecting victims.”

Anderson’s firm has targeted at least 16 companies to date. It employs 10 people, mostly former journalists and analysts, Bloomberg reports.

Who is Hindenburg’s founder?

Anderson, 38, grew up in a small town in Connecticut and earned a degree in international business at the University of Connecticut.

Seeking a “diverse set of experiences,” as he put it to the Financial Times in 2021, he worked as a paramedic while studying abroad in Israel. His career in finance began at financial data company FactSet Research Systems. There, he worked with investment management companies, and found that “the processes across these firms is virtually the same, and not particularly incisive,” as he told the FT.

Stints in capital-raising at the firms Blue Heron Capital and Tangent Capital were Anderson’s first steps toward investigative research. His roles involved studying hedge funds and investment opportunities for high-net-worth individuals, according to his his LinkedIn profile.

His first big win was unearthing fraud at hedge fund Platinum Partners. For this case, Anderson teamed up with another senior financial fraud investigator, his mentor Harry Markopolos, who famously went after Bernard Madoff’s Ponzi scheme.

Why do corporates fear Anderson?

The short-seller is often not welcome in corporate circles,where short bets are commonly viewed as a means to attack companies and stunt their growth.

Short sellers, who profit when a targeted stock declines, have been a part of the market ever since the stocks came into existence. They create an important system of checks and balances in markets prone to froth.

According to Hindenburg’s report, the firm put together its short positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments. It also underscored the huge debt pile on the Adani books, which Hindenburg says has put the entire group on a “precarious financial footing.”

By the digits

$100 billion: Addition in Gautam Adani’s net worth in the past three years due to a meteoric rise in stock prices

$39.4 billion: Wealth erosion of Adani Group in a span of two trading days

38: The number of shell entities identified by Hindenburg Research that are allegedly controlled by Gautam Adani’s elder brother Vinod Adani or other close associates

$17 billion: The combined amount of alleged money laundering, theft of taxpayer funds, and corruption that was previously investigated by four government agencies that looked into Adani holdings

85%+: The amount of downside Hindenburg sees for Adani-listed firms “purely on fundamentals”