“Fraud cannot be obfuscated”- Hindenburg research.

It's a David and Goliath story- Hindenburg is the small financial research company that chose to pick a fight with a giant conglomerate- the Adani group.

Gautam Adani once the 4th richest person in the world having amassed a personal fortune of $120 billion, watched his net worth drop to $61.7 billion in less than 2 weeks and the Adani group of companies saw a dip of $117 billion as of February 3rd 2023. The self-made Indian industrialist who founded and heads the Adani group of companies, a multi national conglomerate (that has extended its ventures into airports, trading and energy), was wealthier than Bill Gates and Warren Buffet in 2022. So who is responsible for his steep fall from grace?

What is Hindenburg research? Hindenburg research is a forensic financial research firm founded by Nathan Anderson in New York. The company investigates cases of corruption and fraud in big business such as accounting anomalies and bad management. The name Hindenburg is derived from the German airship that caught fire in the 1930s- a man-made and avoidable disaster. The company looks for similar disasters in the financial world that are man-made and avoidable. Hindenburg is also a short-selling firm- and short sellers argue that they prevent assets from becoming overinflated. Short selling is an investing tactic premised on a stock losing its value. In a 2021 report, Hindenburg wrote that “critical, adversarial research is needed because Wall Street is a finely tuned machine, built to sell securities to the public regardless of quality. The corporate world is rife with fraud and investors have little protection”.

Hindenburg has cast the first stone at the Indian business titan accusing the group of stock manipulation and decades worth of accounting fraud. Among the list of allegations, Hindenburg also found that Adani's older brother Vinod Adani participated in stock manipulation and ran offshore shell companies. The offshore companies were used to transfer money from the private Adani companies to the publicly listed ones. Hindenburg has also found accounting irregularities and questioned the credibility of the auditors for Adani enterprises and Adani gas- alleging that the 2 auditors were fresh out of school and not in a position to audit the accounts of some of the largest companies in the country.

Previous cases? Hindenburg research is reputedly known for sniffing out financial malfeasance. In 2020 it directed allegations of fraud at the electric vehicle company Nikola. The founder and executive chairman of Nikola, Trevor Milton was accused of misleading partners into signing agreements by falsely claiming to have extensive technology that gave the company advantage in the industry. Hindenburg unearthed extensive evidence proving that Nikola had made false claims regarding battery technology and renewable gas to entice investors. Hindenburg was working with a Nikola whistle-blower to compose their allegations and report against the company and against Milton.

Nikola and the Adani group are just 2 among many cases that Hindenburg has shed light on. Their scrutinizing investigations of the world’s largest and wealthiest leave scorching burns and shoots down stock prices and investor confidence. Hindenburg’s track record should worry Adani- subsequent to the allegations against Nikola, government and investor investigations were triggered and Milton was convicted by a U.S jury for fraud.

In response to the Adani group’s denial of all the allegations, Hindenburg research simply responded by saying “fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised”.