Giantkiller, reviled by corporates, wall streeter and activist short seller, are just some of the epithets that Hindenburg founder Nathan Anderson has earned. But shortseller is the term which describes his role in the stock markets most accurately, as it also describes his motivation behind digging out scams. Its hard to tell if Anderson seeks to serve investors by exposing dubious stocks, or is looking to cash in on falling stocks, and his history is equally complex.
Humble origins
Born to a college professor and a nurse in a small town of Connecticut, Anderson's journey was also marked by a brief stint in Israel. He worked as a paradmedic while attending Hebrew University, although he had a business degree from the University of Connecticut. After college he joined a financial analytics firm, before moving on to audit and verify deals for high net worth families.
A passion for investigation
Unearthing scams was just Anderson's passion which also led him to Harry Markopolos, the man who tried to warn authorities about Bernard Madoff as early as 2000. By the time the Madoff investment scandal was exposed in 2008, it was history's largest ponzi scheme worth almost $65 billion. While he founded Hindenburg, named after a 1937 airship disaster, in 2017, Anderson was working from a WeWork space in Manhattan.
Bounced back before hitting rock bottom
Despite shorting stocks of smaller firms, Anderson faced debt and eviction from his apartment, just when he wrote a report on medical cannabis firm Aphria. The findings revealed that Aphria was using shell firms to siphon off shareholders' funds, and triggered a 30 per cent plunge for its stocks. He shorted the stock, and made a profit that prevented him from losing his home.
Meet the tribe of activist shortsellers
For the uninitiated, shortselling is the practice of borrowing stocks which are consistently gaining value and selling them on the market at a high price. This is done with the anticipation that the stock's value will crash, and when that happens, shortsellers buy it back. This is done in a short window before the delivery date of shares, and the stocks sold and bought back are returned to the original owner.
The difference between the high price at which a stock was sold and the low price that was paid to buy it back, is the shortseller's earning. Activist shortsellers are those who borrow and sell shares of firms with inflated rates, before blowing the lid off the scam to buy them back once the expose triggers a crash in stock prices.
Bringing together professionals
Anderson's break with Aphria helped him stay in the game and gather a team of former Bloomberh and CNN journalists, as well as analysts. The team backed by around 10 investors with a lot of cash, to investigate firms and put together reports which take at least six months. The investors have remained anonymous so far, while Anderson has exposed multiple entrepreneurs as frauds.
What's his track record?
In 2020, Anderson released a report which showed that hydrogen truckmaker Nikola's vehicles didn't have an engine. Later the firm had to admit that a truck purportedly moving on hydrogen in a viral video, was actually just rolling downhill. By October 2022, Nikola's founder was finally found guilty of fraud, and the expose catapulted Anderson into the limelight.
Since then Anderson has gone after a Chinese crypto firm, an online betting operator, and Ebix founded by Indian-American Robin Raina lost 37 per cent in share value after a Hindenburg report on its dealings. A sessions court in India had barred the publishing of the findings on Ebix in India last year.
Agenda-driven champion of truth?
So Anderson has a motivation and an agenda for the report on Adani, which is clearly making money. But reports by Hindenburg have triggered off investigations which resulted in convictions for fraud. Although Anderson's reasons behind the Adani report can be questioned, the claims in his report warrant attention.
