The shares of the Indian conglomerate Adani Group plummeted on Wednesday morning after activist investing company Hindenburg Research accused it of fraud.
Hindenburg Research said that Adani Group companies, which are owned by the world’s third-richest person Gautam Adani, “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades”.
The accusation: In the report released Wednesday morning, Hindenburg further warned that “even if you ignore the results of our investigation, Adani Group’s core listed companies have 85% downside merely on a fundamental basis owing to sky-high valuations.”
See excerpts from the report
- Today we reveal the findings of our 2-year investigation, presenting evidence that the INR 17.8 trillion (U.S. $218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.
- Gautam Adani, Founder and Chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group’s 7 key listed companies, which have spiked an average of 819% in that period.
- Our research involved speaking with dozens of individuals, including former senior executives of the Adani Group, reviewing thousands of documents, and conducting diligence site visits in almost half a dozen countries.
- Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations.
See the link to the Hindenburg Research report here.
Adani Group responds: In a statement shared with Forbes, Jugeshinder Singh, Adani Group’s Chief Financial Officer, said the conglomerate was shocked by the Hindenburg report.
- He described it as “a malicious combination of selective misinformation and stale, baseless, and discredited allegations”.
- Singh further noted that the timing of the report, coming days ahead of a share offer by Adani Enterprises, was intended to “undermine the Adani Group’s reputation” and damage demand for the upcoming offering. He added that the group “has always been in compliance with all laws”.
- The statement added that the company was never contacted by Hindenburg and criticizes the timing of the report’s publication, saying it “clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming Follow-on Public Offering from Adani Enterprises.
Adani shares plummet: In the meantime, the Shares in seven listed Adani Group companies were down 4.6% on average in afternoon trading in Mumbai, with those in flagship business Adani Enterprises falling as much as 3.7%.
- The declines brought the combined loss in market capitalization for Adani Group stocks to about Rs762 billion ($9.4 billion).