Adani, Embattled Indian Company, Scraps $2.5 Billion Share Sale

Adani Enterprises, the flagship of the Indian conglomerate Adani Group, called off its $2.5 billion share sale on Wednesday, citing “market volatility,” a blow to the company and its billionaire founder, Gautam Adani, as it struggles to overcome a plunge in value set off by fraud allegations made by a New York investment firm last week.

The announcement followed a sharp drop in shares of Adani Enterprises on Wednesday, wiping billions of dollars from its market valuation and pushing its price well below the range it offered to investors in the sale. The sale closed on Tuesday and was fully subscribed by investors including state-led institutions like Abu Dhabi’s International Holding Company and funds controlled by the State Bank of India.

Adani Enterprises said in a statement that it would withdraw the transaction and return the money.

“The market has been unprecedented, and our stock price has fluctuated over the course of the day,” Mr. Adani said in the statement. “Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct.”

Other Adani Group companies, including Adani Green Energy and Adani Total Gas, have also fallen sharply in recent trading. Shareholders in these companies have seen more than $90 billion in market value wiped out since the investment firm Hindenburg Research accused the group of running “a brazen stock manipulation and accounting fraud scheme” in part by relying heavily on offshore tax shelters.

Hindenburg is what’s known as an activist short seller, an investor that takes aim at companies it suspects of fraud and exposes the wrongdoing. Short sellers then profit from investments when a target company’s share price falls. Hindenburg has taken on about 30 companies and made its name when it raised evidence of fraud at Nikola, the electric vehicle maker, which led to the ouster and conviction of Nikola’s founder, Trevor Milton.

The Adani Group has dismissed Hindenburg’s allegations, and called its report a “calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.” Adani has threatened to sue Hindenburg, which responded by saying it would welcome a suit in the United States, where it could demand Adani documents as part of legal discovery.

Mr. Adani, 68, has styled himself as an industrialist. His company controls ports, coal mines, food businesses, airports and more, but critics claim Mr. Adani’s political connections set him apart, saying his ties to Prime Minister Narendra Modi of India have helped the company win lucrative contracts.

Mr. Adani has rejected claims of preferential treatment. As his business empire has grown, he has been able to brush off increased scrutiny. His company was investigated on allegations of tax impropriety related to imported equipment and coal, but was eventually cleared. And the rise in shares of an Adani subsidiary led to speculation that the stock was being manipulated.

Now he is facing perhaps the biggest challenge of his career.

Last year, Mr. Adani’s net worth skyrocketed to around $120 billion, making him the richest man in Asia and one of the four wealthiest people on earth, behind Bernard Arnault, Elon Musk and Jeff Bezos. But his personal fortune continues to shrink amid a sell-off that’s hobbling his business empire and his big growth ambitions.