Hindenburg Research Report is Deliberate Manipulation, Betrays Conflict of Interest, Says Adani Group

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Adani Group in a statement on Sunday said it is shocked and deeply disturbed to read the report published by the "Madoffs of Manhattan" - Hindenburg Research on January 24 which is nothing but a lie.

The document is a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive, Adani Group said.

No Credibility or Ethics

This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors.

Gautam Adani
Gautam Adani Wikimedia Commons

It is tremendously concerning that the statements of an entity sitting thousands of miles away, with no credibility or ethics has caused serious and unprecedented adverse impact on our investors. The mala fide intention underlying the report is apparent given its timing when Adani Enterprises Limited is undertaking what would be the largest ever further public offering of equity shares in India. This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India, Adani Group said.

There are three key themes from the Hindenburg Report: (i) Selective and manipulative presentation of matters already in the public domain to create a false narrative. (ii) Complete ignorance or deliberate disregard of the applicable legal and accounting standards as well as industry practice. (iii) Contempt for the Indian institutions including the regulators and the judiciary, Adani Group said.

Purely out of Selfish Motives

The report has been put out with the admitted intent of Hindenburg (holding short positions in various listed companies of the Adani portfolio through US traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities) to profiteer at the cost of our shareholders and public investors. Hindenburg has not published this report for any altruistic reasons but purely out of selfish motives and in flagrant breach of applicable securities and foreign exchange laws.

The truth of the matter is that Hindenburg is an unethical short seller. A short seller in the securities market books gain from the subsequent reduction in prices of shares. Hindenburg took "short positions" and then, to effect a downward spiral of share price and make a wrongful gain, Hindenburg published a document to manipulate and depress the price of stock, and create a false market. The allegations and insinuations, which were presented as fact, spread like fire, wiping off a large amount of investor wealth and netting a profit for Hindenburg. The net result is that public investors lose and Hindenburg makes a windfall gain. Thus, the report is neither "independent" nor "objective" nor "well researched". The report claims to have undertaken a "2-year investigation" and "uncover evidence", but comprises of nothing other than selective and incomplete extracts of disclosed information which has been in the public domain for years if not decades, attempts to highlight allegations which have since been judicially determined to be false, narrates as fact what is attributed to hearsay, rumours and gossip spread by unnamed sources such as "a former trader" or "touts" of a "close relationship", questions the independence of the judicial processes and regulators in the nation, and selectively extracts statements devoid of their context and with no understanding of Indian law or industry practice, Adani Group said.

Adani Group
Adani Group Wikimedia Commons

It is telling that not one of the allegations is a result of any independent or journalistic fact finding. The allegations and innuendoes made in the Hindenburg report are knowingly false.

Hindenburg's conduct is nothing short of a calculated securities fraud under applicable law, Adani Group said.

Ironically for an organization that seeks transparency and openness, nothing much is known about either Hindenburg or its employees or its investors. Its website alleges that the organisation has an experience that "spans decades" and yet appears to have been set up only in 2017.

Despite all its talks of "transparency", Hindenburg has actively concealed the details of its short positions, the source of its own funding, who is behind them, the illegality underlying the synthetic structures by which they hold such positions, or the profit it has made by holding such positions in our securities, Adani Group said.

Not one of these 88 questions is based on independent or journalistic fact finding. They are simply selective regurgitations of public disclosures or rhetorical innuendos colouring rumours as fact. The report seeks answers to "88 questions" -- 65 of these relate to matters that have been duly disclosed by Adani Portfolio companies in their annual reports available on their websites, offering memorandums, financial statements and stock exchange disclosures from time to time. Of the balance 23 questions, 18 relate to public shareholders and third parties (and not the Adani portfolio companies), while the balance 5 are baseless allegations based on imaginary fact patterns.