Morgan Stanley strips Adani stocks of free float status, Hindenburg calls it validation of its report

Even after repeated statements, prepayment of loans and attempts to allay concerns about high debt, the Adani Group is being haunted by Hindenburg Research's report. After a stock market rout for two straight weeks, and a cancelled FPO, Adani stocks seemed to be making a comeback in the past couple of days. But its flagship Adani Enterprises has cracked yet again by 15 per cent, after the group's stocks have lost their status as free float market participants.

The decision to strip some Adani stocks of the free float label was taken by Morgan Stanley Capital International after reviewing feedback from several market participants. The MSCI cited uncertainty in the characteristics of certain investors as a reason for changing the designation.

Free float status makes the shares of a company available for purchase on the open stock market, and losing it will further affect the reach of Adani Group stocks among retail investors. This can be a blow to the group, which already found only 12 per cent takers for its FPO among common retail stock buyers. The MSCI's review will also lead to a suspension of any potential changes in the number of shares for the stocks.

Responding to the development, Hindenburg Research founder and shortseller Nate Anderson has called MSCI's verdict a validation for the firm's findings.