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Hindenburg Research slams Indian conglomerate Adani, alleging fraud and manipulation

Yahoo Finance's Alexandra Semenova discusses a new report from Hindenburg Research with allegations that Adani has committed the "largest con in corporate history."

Video transcript

JULIE HYMAN: Looking elsewhere in the markets today, major short seller Hindenburg Research putting out a market-moving call on Adani Group. It's the family-owned businesses of Asian billionaire Gautam Adani.

Here with more is Yahoo Finance's Alexandra Semenova. And this really goes straight to the heart of the empire of one of the richest people in the world, and it's having an effect across his different companies.

ALEXANDRA SEMENOVA: Yeah, absolutely, Julia. We're seeing some big moves this morning after Hindenburg Research, which is an activist short-selling firm, made a big call yesterday publishing a report saying that Adani Group, an Indian conglomerate that runs a portfolio of energy and logistics companies, is committing what it called the largest con in corporate history. As we know, it also revealed a short position in the company.

As we know, short selling is an investment strategy that bets that a stock price will decline. It's essentially a bet on the downfall of a company. Hindenburg accused Adani Group and its billionaire founder and chairman of a brazen stock manipulation and accounting fraud scheme run over decades, partly through the use of shell companies. It also said that Adani Group has been investigated for misusing taxpayer funds, for corruption, for money laundering.

And then separately, Hindenburg also flagged some financial concerns with the company, saying that it was taking on too much debt, that seven of its publicly traded companies were overvalued.

Adani Group, of course, dismissed all of those allegations, calling them baseless, calling them "a malicious combination of selective misinformation and stale, baseless, and discredited allegations."

Whether Hindenburg Research is right or not, we're seeing that call wipe out about $12 billion off of Adani's market value this morning. So we'll see what happens with that.

BRIAN SOZZI: Now, it is interesting, that reaction, Alexandra. Hindenburg is not some bucket shot, one person running it. They've made some big calls in the past.

ALEXANDRA SEMENOVA: Exactly. So investors have good reason to believe that Hindenburg is right here. This is a highly respected firm whose track record has been correct so far.

The firm is fairly young. It was founded in 2017. But even in its short tenure, it's already established its reputation by being correct on its call on Nikola, you know, leveling big allegations of fraud with that company and then being right. We saw the SEC used Hindenburg's research on Nikola in its trial against Trevor Milton, and you know, it's also made some other successful calls on SPACs and crypto companies.

Now, short sellers obviously have a bad reputation. There's this notion that you're betting, you know, on someone else's failure. However, some of the biggest instances of corporate fraud in history have started because someone had a short position in a company. So they also have a role in protecting investors sometimes by exposing fraud.

And, you know, if these allegations turn out to be correct, it will obviously be very consequential. This is the biggest company in India.

BRIAN SOZZI: Good point. Alexandra Semenova, thanks so much. Appreciate it.