Activist short seller sets its sights on Adani, ‘the biggest con’

• Hindenburg Research outfit says it has uncovered decades of stock manipulation and accounting fraud

Over the past few years, Nathan Anderson has made a name with analysis that sends stocks sinking. Now the activist short seller behind Hindenburg Research is going after his biggest game yet — what Hindenburg is calling, with characteristic chutzpah, “The largest con in corporate history”.

His target: Indian industrialist Gautam Adani, a figure even richer than Bill Gates and Warren Buffett, with a net worth of $113.4bn, according to the Bloomberg billionaires index.

Hindenburg levelled a series of extraordinary allegations about the sprawling Adani Group conglomerate. The exposé was the result, it said, of a two-year investigation into what it is characterising as a brazen scheme of stock manipulation and accounting fraud dating back decades.

The report, which the Adani Group has called “maliciously mischievous” and “unresearched”, promptly wiped $12bn off market value.

Hindenburg hopes that is just the beginning. Adani says it is exploring legal action.

It’s a remarkable turn for Anderson, who first got Wall Street’s attention with takedowns of electric-vehicle makers Nikola and Lordstown Motors but Hindenburg has never swung at a company as big and powerful as Adani Group. (Anderson briefly bet against Twitter as Elon Musk was buying the company and then turned bullish on the stock in July 2022.)

The question is whether other investors will heed Hindenburg’s warnings about Adani, whose dizzying wealth cuts across India’s economic and political life. It’s difficult to overstate just how lopsided this fight is. Gautam Adani has spent four decades building an empire spanning energy, agribusiness, property and defence. He is considered to have a close relationship with India’s Prime Minister Narendra Modi, with his ambitious goals closely aligned with the government’s priorities.

SHORT SELLERS

Anderson’s New York-based firm, technically a research and trading outfit not a hedge fund with outside investors, is less than five years old and wagers its own money in the markets. Even in Manhattan’s financial circles, he’s hardly a big name.

And yet Anderson has managed to make a mark lately.

Hindenburg, named after the German airship that blew up in 1937, has targeted about 30 companies since 2020. On average, their stocks fell about 15% the next day and were down 26% six months later, according to calculations done by Bloomberg News.

Anderson declined to comment for this story. But Hindenburg is bracing for a blow-by-blow response from the Adani Group.

Short sellers — and the controversies that often surround them — have been around for as long as there have been stocks.

The Dutch briefly outlawed the practice in the 1600s after traders shorted the Dutch East India Company, purported to be the first company in the world to issue shares.

Lately, US authorities have looked into whether some shorts have occasionally colluded to attack companies.

Hindenburg hasn’t been accused of wrongdoing, but some of its peers have been sounding the retreat.

Hindenburg’s method is simple. Anderson and his team dig into companies and look for malfeasance. One high-profile example: Nikola, which Hindenburg called an “ocean of lies’.’

Last October, Nikola founder Trevor Milton was convicted of defrauding investors.

For all the noise that Hindenburg makes, Anderson himself keeps a low profile.

He grew up in a small town in Connecticut and earned a business degree from the University of Connecticut.

PONZI SCHEMES

HINDENBURG, NAMED AFTER THE GERMAN AIRSHIP THAT BLEW UP IN 1937, HAS TARGETED ABOUT 30 COMPANIES

During college, he lived for a time in Israel, working as a paramedic while taking classes at Hebrew University. He later worked for a financial analytics company before taking a job checking out potential deals for the investment firms of wealthy families. His passion, he has said, is to “find scams”.

Early on, he spent hours looking into potential Ponzi schemes and occasionally teamed up with forensic accountant Harry Markopolos, who famously tried to warn federal authorities about Bernard Madoff.

Anderson has called Markopolos a role model.

In about 2014, Anderson started filing whistle-blower complaints with US authorities in hopes of collecting bounties for unearthing fraud.

One of his first big gets was looking into hedge fund Platinum Partners with Markopolos. Seven executives were charged later with fraud.

Today Hindenburg employs about 10 people, a mix of former journalists and analysts. Sometimes hedge funds have joined in on its trades.

Even if Adani beats back Hindenburg — and the odds are squarely in Adani’s favour — Anderson has no shortage of work left to do.

“There’s still plenty of fraud out there,” Anderson told the New York Times last October.

“If there’s ever a time that I feel that most of the corporate fraud in America has been eliminated, then I’ll probably announce that I’ll go grow tomatoes or something.”