India’s Gautam Adani, the dropout who rose to become one of the world’s richest men, suffered a stunning defeat when his firm withdrew a blockbuster share sale after an attack by a small U.S. investment firm over his business practices.
Adani Group scandal
Almost a week after a feared short-seller put his company in its sights, Gautam Adani has lost his title as Asia’s richest person. Adani’s companies lost nearly $100 billion in the stock market as investors bailed out the tycoon who built an empire spanning ports, coal mines, food businesses, airports, and lately media.
How did it Happen?
Hindenburg Research, a small firm run by short-seller Nathan Anderson, published a 100-page report (Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History) accusing the Adani Group, an empire founded by Indian businessman Guatam Adani, of perpetuating “the largest con in corporate history.”
The report argued the group was “engaged in a cheeky stock-manipulation and accounting fraud scheme,” and considerably exaggerated its companies’ valuations in an attempt to “maintain the appearance of financial health and solvency” despite huge debts. Hindenburg also revealed that it had taken a so-called “short” position against the tycoon’s companies, betting that the conglomerate’s stock price would drop to the benefit of the firm.
Since the report was published, the Adani Group has lost over $100 billion in market value. That means almost 40 percent of the empire’s shares were wiped off in just over a week. Even a share offering of $2.5 billion in stocks by Adani Enterprises, which opened on January 27 and expired on Tuesday, in an attempt to extend the group’s investor base was overturned and couldn’t help the crisis as buyers were repelled by the scandal.
On February 1, Forbes also announced that 60-year-old tycoon Gautam Adani was no longer the richest man in Asia and that his net worth had dropped to $74.7 billion, falling by over $50 billion after the scandal.
Adani even lost his status to the chairman of Reliance Industries, Mukesh Ambani, who has a net worth of $83.8 billion.
Before the crisis, the combined market capitalization of the Adani Group’s seven listed companies, including Adani Ports, Adani Wilmar, Adani Power, Adani Transmission, Adani Green Energy, and Adani Total Gas, exceeded $218 billion.
How has the Adani Group responded?
The group accused Hinderberg’s report as “baseless” and “malicious,” and blamed the firm for having an “ulterior motive” for publishing the document. “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,” the group wrote in its 413-page rebuttal.
The document said Hindenburg’s actions represent a “calculated attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and ambition of India.” Hinderberg and Anderson have not backed down from their accusations.
