Hindenburg Research dismissed as ‘nonsense’ a purported show-cause notice from the Securities and Exchange Board of India (SEBI) that has said the short-selling hedge fund engaged in fraudulent and unfair trade practices concerning trading in Adani Enterprises’ stock, and violated Indian regulations.
The US-based investment research firm stated on its website that the notice from SEBI has been “concocted to serve a preordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.”
It added that SEBI seemed to be more interested in “pursuing those who expose such practices.”
Calls and text messages to a SEBI spokesman did not elicit any response.
In January 2023, the hedge fund released a 106-page report accusing the Adani Group of stock manipulation and accounting fraud over decades. This led to a $100-billion crash in Adani’s stock prices. A Supreme Court-mandated committee and subsequent probes cleared the group, while a SEBI investigation remains inconclusive.
‘report caused panic’
According to the SEBI show-cause — a link for which was put up by Hindenburg on its website — the Hindenburg report in 2023 contained “certain misrepresentations/inaccurate statement.
These misrepresentations built a convenient narrative through selective disclosures, reckless statements and catchy headlines in order to mislead readers of the report and caused panic in Adani Group stocks, thereby deflating prices to the maximum extent possible and profit from the same.”
“Prior to the release of the Hindenburg report, concentration in short selling activity was observed in the derivatives of AEL,” the SEBI notice said. After the release of the report, shares of Adani Enterprises fell 59 per cent during the period between January 24, 2023 and February 22, it pointed out.
It also said that the disclaimer by the short seller on holding positions in the Adani group stock “only through non-Indian traded securities was misleading since it concealed the complete extent of its financial interest in companies which were the subject of its research report due to Hindenburg’s direct stake in profits from positions taken by the FPI in the future of AEL on the Indian stock exchange.” It added that the statement portraying the non-association of Hindenburg with the Indian markets was not true.
The notice has directed Hindenburg Research to show-cause as to why inquiries should not be held against it and directions issued for disgorging profits unlawfully made. A reply has been sought within 21 days of receipt of the notice and indicate its preference for a personal hearing on the matter.
