Asia’s richest man lost nearly $50 billion in one week: NPR

New Delhi – On Wednesday, Indian businessman Gautam Adani lost the title of Asia’s richest man. As of early January, he was not only the richest in Asia, but the third richest in the world and a few billion shy of Elon Musk. But last week, Adani dropped several places in the list of the world’s richest people Forbes and Bloomberg. In less than 10 days, his personal wealth dropped to $50 billion, while his companies lost nearly $100 billion in market value.

the reason? A US-based short-seller, a research firm that bet on Adani’s share price, has been accused of “pulling the biggest gig in corporate history”.

On January 24, Hindenburg Research released a more than 100-page report, alleging that Adani’s conglomerate “engaged in egregious stock manipulation and accounting fraud over a period of decades.”

The Adani group termed the claims “nothing but lies”.

On Wednesday, Adani Group shares fell further after Bloomberg reported that Swiss investment banking firm Credit Suisse has stopped accepting the Indian conglomerate’s bonds as collateral. The conglomerate also called off a $2.5 billion stock sale the same day — a move that raised more eyebrows than investors.

Hindenburg said he had evidence of “brazen accounting, stock manipulation and money laundering at Adani”. He alleged that the amount of debt in the group’s companies had reached alarming levels and that he was funneling the money illegally through shell companies in tax havens such as Mauritius. The report stated that many of the group’s top executives are members of the Adani family; It creates a favorable environment for non-transparent funding.

Sonam Srivastava, founder of Indian investment advisory firm Wright Research, was not surprised by allegations that Adani’s shares were overvalued. But “allegations of listing fraud and market manipulation are appalling,” she says.

“It is clear that Adani has had very little monitoring, no coverage by analysts and no action by the regulator to investigate their business processes or pricing practices.”

Amol Agrawal, who teaches economics at the University of Ahmedabad in Gujarat, India, said the Adani unit is “a big problem for the group’s image, and a reputation here is very important.”

Relationship with Indian leadership

Adani’s businesses include everything from airports and ports to coal and renewable energy and, more recently, media. The 60-year-old’s meteoric rise over the past few years – about $100 billion of his previously estimated $120 billion net worth (before the scandal broke) in the last three years – coincided with India’s election and rise. Prime Minister Narendra Modi.

Both men, hailing from the western Indian state of Gujarat, had humble beginnings and had been friends for many years, observers note. In the year In 2014, then Prime Minister Modi traveled to New Delhi for his inauguration on an Adani aircraft.

The Hindenburg Report led to a re-examination of the relationship between the two men. “Adani has pulled off this mammoth task with the help of government enablers and a cottage industry of global companies facilitating these activities. These cases of corruption have permeated multiple layers of government,” the report states.

“There is no smoke without fire.”

Hindenburg is not merely exposing the alleged fraud as a public service. He holds short positions in Adani Group, which means Hindenburg will cash in if Adani’s shares fall. The short seller has a profitable track record for blowing the whistle on corporate fraud around the world, from the US to China. In the year In 2022, for example, Trevor Milton, the founder and CEO of electric vehicle company Nikola, accused him of making false claims to inflate the stock price. Soon after, Milton was found guilty in a US federal court.

“Short sellers have their own games, just like long buyers,” says Agrawal. “But there is no smoke without fire.”

Hindenburg It was founded in 2017 by Nathan Anderson, a former hedge fund manager who is now among a small group of activist short sellers on Wall Street — traders who make money by shorting or betting on large companies. According to 2021 New York Times According to Anderson, he turned his passion for “finding scams” into a career.

This is not the first case of fraud against Adani.

In the year In 2021, Indian lawyer Mahua Moitra, who is an opposition party member and former investment banker, wrote to the Securities and Exchange Board of India calling for an investigation into Adani’s alleged use of offshore companies. “The regulators never took a stand and the case fell through,” said Srivastava, founder of an investment advisory firm.

The Adani group has been the subject of several investigations by government agencies, but Hindenburg says most have been stalled or stonewalled.

“Calculated Attack on India”.

Agrawal of the University of Ahmedabad, also wonders why it took a US-based research institute to raise such serious questions about the Adani Group. « There are too many stock market analysts. [in India]Why didn’t these people see what they saw? ” he asks.

Much of market analysis today is “buy, buy, buy,” he says, and points to a broader problem. “The stock market and the overall financialization of the global economy has moved in one direction. What you want to do is make sure that the stock markets and any companies that trade there are going up consistently. Because if something happens, there’s a general. Falling.”

On January 29, the Adani group issued a rebuttal of more than 400 pages on Hindenburg’s findings, which it called a “malicious combination of selective misinformation and hidden facts.” The statement cited a conflict of interest on Hindenburg’s part as a short seller.

“This is not just an unwarranted attack on any company, but a calculated attack on India, the independence, integrity and quality of Indian institutions and the history and aspirations of India’s growth,” the statement said. The Adani Group has said it is considering suing Hindenburg.

Hindenburg said he would welcome any legal action and “fraud cannot be disguised by nationalism.”

Hindenburg said, “We believe that India is a vibrant democracy and a superpower with an exciting future. We also believe that India’s future is being systematically looted by the Adani Group by hanging itself on the Indian flag.”

Tuesday, the newspaper of India Mint Adani Group has reportedly planned to conduct an independent audit of its eight listed companies. India’s securities regulator is also stepping up scrutiny of Adani’s deals, Reuters reported.

The fallout from the Hindenburg report comes amid Adani’s critical $2.5 billion follow-on public offering, or secondary share sale, which drew muted reactions from retail investors but was backed by investors such as Abu Dhabi International Holding Co. Full subscription but the corporation withdrew it the next day citing market volatility. “It would not be morally correct to continue,” Adani said They spoke investors on Thursday.

Whether Adani’s allegations will have wider implications for India’s reputation remains to be seen, Agrawal said.

“If this is a one-time issue and it is detected quickly, it will not affect India’s image,” he says. But if these problems of good governance and similar problems are not limited to one group and if it is a big event, there can be moderate condemnations from this point of view. [investors] He can spend money.”