Gautam Adani Lost $36 Billion in Days. Who Is He, and What Happened?

Named after the famous doomed airship, Hindenburg is what is known as an activist short seller on Wall Street. The firm hunts for frauds and other irregularities in public markets, exposes the wrongdoing and makes money while doing so. It profits when its target, often a publicly traded company, sees a drop in its share price.

Activist short sellers have been criticized by some for betting against businesses. The shorts say they are helping police the market.

Hindenburg, which is only a few years old, has targeted about 30 companies and made its name by taking down Nikola, the electric vehicle maker. According to Bloomberg News, stocks in those companies fell about 15 percent, on average, the day after Hindenburg issued its reports, and were down 26 percent six months later.

In the Adani Group, Hindenburg’s founder, Nathan Anderson, has taken on a goliath. Hindenburg said it had researched Mr. Adani’s businesses for two years before publishing its report on Jan. 24. The Adani Group 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.

Among Hindenburg’s allegations are that offshore shell companies run by Mr. Adani’s older brother, Vinod Adani, helped the conglomerate manipulate its share prices. The shell companies are also used to launder money from private Adani companies to the publicly listed ones, Hindenburg said, “to maintain the appearance of financial health and solvency.”

Highlighting what it called “obvious accounting irregularities and sketchy dealings,” Hindenburg said the fact that the listed Adani companies did not have long-serving chief financial officers was a red flag. The short seller also called into question the quality of the independent auditor for two subsidiaries, Adani Enterprises and Adani Gas. Employees of the auditor were “essentially fresh out of school, hardly in a position to scrutinize and hold to account the financials of some of the largest companies in the country.”

Hindenburg went on to say that even if its allegations were ignored, the Adani Group companies were so overvalued that their stocks could fall 85 percent. The group, Hindenburg added, is also overburdened by debt.