The stock prices of the seven publicly-traded companies under the Adani Group, an Indian conglomerate, have experienced a substantial decline following the publication of a report from a short seller.
Despite a response from the conglomerate denying the allegations of fraud and market manipulation, investors remain wary and have caused shares to continue to slide.
Market Impact
The stocks of Adani Transmission Ltd and Adani Total Gas Ltd experienced the most severe market decline, with shares falling 14.5% and 17.6%, respectively. Adani Green Energy Ltd also saw a significant drop of nearly 13%. The stock prices of Adani Wilmar Ltd and Adani Power Ltd decreased by 5% each, while Adani Enterprises Ltd and Adani Ports and Special Economic Zone Ltd saw a decline of 4.8% and 5.5%, respectively.
The market impact was not limited to Adani Group alone, as the selling spread to broader Indian markets. The BSE Sensex 30 and Nifty 50 indexes experienced a decline of 0.9% and 1.1% respectively, as a result of the market impact on Adani Group. Additionally, Indian bank stocks were heavily affected by the selling, as investors worried about the potential spread of losses to other companies in the sector.
Hindenburg Report
A 106-page report from short seller Hindenburg dubbed Adani as the “largest corporate con in corporate history” and expressed concern over the company’s highly leveraged debt position, claiming it led to at least an 85% overvaluation in stock prices. The report also made allegations of fraud and manipulation of the stock market and implied that Indian regulators were complicit in the alleged fraudulent activities.
Adani Group denied the accusations made in the Hindenburg report and announced that it is considering taking legal action against the short seller. The conglomerate stated that the report was “maliciously mischievous, and unresearched” in a statement issued to Indian exchanges.
Hindenburg in turn said it welcomed the threat of legal action, inviting the conglomerate to file suit in the U.S.
“We have a long list of documents we would demand in a legal discovery process,” Hindenburg said in a statement posted on Twitter.
Our response to Adani: pic.twitter.com/6NcFKR8gEL
— Hindenburg Research (@HindenburgRes) January 26, 2023
After the release of the report, shares of Adani Group saw a drastic drop, with the company’s bonds listed in the United States also experiencing a decline. Hindenburg, the short seller who issued the report, stated that they had no direct involvement in Adani shares and had instead taken a short position in the company through its U.S. bonds and other financial derivatives.
Adani’s Secondary Share Sale
The release of the Hindenburg report added further uncertainty to Adani’s already pressured market position, coming just days before the company planned to launch a $2.45 billion secondary share sale. This has caused concern among investors and may impact the sale’s potential success.
Conclusion
The Hindenburg report has caused a significant market impact on the Adani Group and broader Indian markets. The conglomerate’s denial of the allegations and threat of legal action has done little to curb the market rout. As investors remain uncertain, it remains to be seen how the situation will play out, especially with Adani’s secondary share sale looming in the near future. It is important for investors to exercise caution and conduct their own due diligence before making any investment decisions.
