Hindenburg’s Adani Group, Icahn calls mark year of prominent bets

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By Ishika Mookerjee and Subrat Patnaik


Bearish wagers against the Adani Group and Icahn Enterprises Inc. have rounded out another remarkable year for activist short seller Hindenburg Research. 

 


The US firm kicked off 2023 with allegations of accounting fraud and stock manipulation against Indian billionaire Gautam Adani’s conglomerate that led to a market value erosion of more than $150 billion at one point. Seven of the group’s 10 stocks are still trading in the red since the scathing Jan. 24 report. Icahn Enterprises, which Hindenburg accused of overvaluing assets, has plummeted nearly 70 per cent since the latter disclosed a short call in a May 2 statement.

These successes mark a string of big hits dealt by the firm founded by Nate Anderson. A scorecard of 14 of the firm’s prominent bets since 2020 shows many of its targets decline once the short position is unveiled. Shares on average dropped about 9 per cent on the first day, and were down 30 per cent a year later, according to calculations by Bloomberg News. 


To be sure, Adani group’s market value has recovered to late-January levels as the conglomerate prepaid debt and lured marquee funds including GQG Partners LLC to boost investor confidence. Still, Gautam Adani’s net worth has shrunk by about $34 billion in 2023, the biggest loss this year on the Bloomberg Billionaires Index. The group has repeatedly denied Hindenburg’s allegations.


Elliott Investment Management and Carson Block’s Muddy Waters LLC are among short sellers which have also had success in recent years.


Here are some of Hindenburg’s other notable shorts in recent years:


Block (March 2023)

 


Hot on the heels of the explosive Adani bet that raised Hindenburg’s profile, the short seller released a report against Jack Dorsey-led Block Inc. In its investigation, the firm alleged it found that Block’s popular Cash App was likely facilitating scammers taking advantage of government-stimulus programs during the pandemic.


Block vowed to work with securities regulators and explore legal action against Hindenburg. Its shares slumped as much as 46 per cent over the next seven months before rebounding to pre-Hindenburg report levels.


Nikola (September 2020)

 


Anderson shot to fame after his short call on Nikola Corp. that followed a Bloomberg story on how founder Trevor Milton had exaggerated the capability of its debut electric truck. Eleven days after Hindenburg published a report on the company, Milton resigned as executive chairman.


On Monday, Milton was ordered to spend four years behind bars for defrauding investors. Nikola’s shares have wiped out nearly all of their value since the report was published.


Mullen Automotive (April 2022)

 


Meme stock Mullen Automotive Inc., an electric vehicle startup, has been among Hindenburg’s most successful calls with shares now valued close to zero from more than $600 in April 2022. The short seller called the company an “EV hustle” last year and accused it of distorting battery-test results.


DraftKings (June 2021)

 


Online gambling company DraftKings Inc. was the subject of a Hindenburg investigation in 2021, which focused on its exposure to money laundering and black-market gaming via its subsidiary SBTech. 


DraftKings said it conducted a review of SBTech’s business and it was “comfortable with the findings” before a merger had been completed in 2020. DraftKings’ shares fell more than 70 per cent in the first year since the short seller’s attack.


Lordstown Motors (March 2021)

 


Another one of Anderson’s bets against the EV hype. Lordstown Motors Corp.’s shares tanked after Hindenburg said it was a company “with no revenue and no sellable product.” Its two top executives stepped down and the electric truckmaker’s board found evidence of inaccurate statements about its pre-orders, but said that other allegations made by the short seller were “false and misleading”. The company filed for bankruptcy protection in June.

First Published: Dec 19 2023 | 8:17 AM IST