The Hindenburg revelations have created a whirlwind of information that has caused chaos in the public domain. After shrouding Adani with accusation of impropriety in 2023, the company has comeback with a new set of allegations. This time, the hedge funders have accused the SEBI chairperson, Madhabi Puri Buch, of having vested interests in thecompany and its offshore business.
In the middle of all this, it is to be noted that the company, according to some, is a 'vigilante' in terms of its activities in exposing fallible companies. The company, at its core, is a short-seller, and according to its own revelations, it made over USD 4.1 million, or over Rs 34 crore, by shorting Adani shares.
What is Short-Selling?
Short selling, in simple words, is the opposite of what usual traders or investors conduct at the markets. Here, the investor or short-seller invests or 'shorts' expecting the company's assets to falter. Usually, when someone invests or buys a share in a company, they do it in the hope of the prices or assets increasing in value.
In this case, however, the short-seller expects the company value to decline, thereby buying shares at a lower rate than what they were initially purchased at. This is a high-risk-to-high-reward mechanism that could result in profits but is also susceptible to losses that are theoretically unlimited.
Four days later, Musk attempted to walk away from the deal, sending Twitter’s stock lower. We covered our short and later went long, believing that Musk’s arguments for backing out were unlikely to prevail in court. |
Hindenburg's Previous Exploits
Hindenburg has previously made such accusations against other companies as well. Previously, they had levelled allegations against Axos Bank in California. Hindenburg accused them of 'Commercial Real Estate Loan Problems and Lax Underwriting'.
It has also accused internet service provider Equinix of accounting manipulation and misleading investors in the name of artificial intelligence.
Most remarkably, the company had also 'shorted' against Elon Musk and X (formerly Twitter) in 2022. In a statement on the shorting, they said, "Elon Musk’s agreement to buy Twitter, we announced a short position, betting that Musk, a notoriously impulsive individual, would either try to renegotiate or walk away from the deal."
It further added, "Four days later, Musk attempted to walk away from the deal, sending Twitter’s stock lower. We covered our short and later went long, believing that Musk’s arguments for backing out were unlikely to prevail in court. Musk later closed the deal at the originally agreed upon price, resulting in investment gains in both directions."
