Mint Explainer: Hindenburg says Sebi notice following Adani report is ‘nonsense, concocted’

The Adani radical denied each the allegations, but shareholders were rattled arsenic the banal terms tumbled implicit the adjacent 3 months. The worth of the 10 listed Adani Group entities declined by $150 cardinal successful the 3 months aft Hindenburg published its report. 

According to the notice, Hindenburg inked an statement with its investor, Kingdon Capital Management, successful May 2021, 20 months earlier it published its study accusing Adani of banal manipulation and accounting fraud. According to the notice, Hindenburg made a nett from taking a abbreviated presumption successful Adani.

Hindenburg responded to the announcement connected 1 July (US time), saying it had been alert that the Securities and Exchange Board of India had been grappling with however to respond to a US-based probe steadfast with nary beingness oregon operations successful India. 

Mint looks astatine the cardinal aspects of the latest Hindenburg post:

What is Sebi's show-cause announcement to Hindenburg each about?

The show-cause announcement dated 26 June 2024 was sent to Hindenburg and Kingdon Capital Management, the lone capitalist with which the US abbreviated seller shared the damning study connected the Adani Group earlier publishing it.

The announcement details however Hindenburg violated immoderate regulations, including inadequate disclosures connected however it traded and profited. It estimates Hindenburg made $14.7 cardinal from taking a abbreviated presumption successful Adani.

The 46-page notice, arsenic shared by Hindenburg, states that the abbreviated seller's study made immoderate inaccurate statements to mislead readers and make panic among investors.

How has Hindenburg responded?

Hindenburg said connected 1 July that the announcement was "nonsense, concocted to service a pre-ordained purpose: an effort to soundlessness and intimidate those who exposure corruption and fraud perpetrated by the astir almighty individuals successful India." 

Hindenburg concluded that Sebi's enactment was akin to shooting the messenger arsenic the marketplace regulator "seems much funny successful pursuing those who exposure specified practices."

Who was Hindenburg's soundless spouse oregon investor?

US hedge money Kingdon Capital Management was the capitalist that partnered with Hindenburg. Financier Mark Kingdon acceptable up his steadfast successful 1983. According to filings with the US marketplace regulator, Kingdon Capital Management had $640 cardinal successful assets nether absorption astatine the extremity of March 2024.

How overmuch did Kingdon Capital and Hindenburg profit?

According to Sebi, Kingdon Capital Management was the lone capitalist with which Hindenburg shared the study earlier it was published. Kingdon Capital Management made a nett of $22.11 cardinal by trading successful futures of Adani Enterprises Ltd shares.

Sebi estimates Hindenburg's stock totalled $5.53 million, oregon 25% of Kingdon Capital Management's profit. From November 2022 to March 2023, Hindenburg incurred a nonaccomplishment of $5,197 from trading bonds of Adani Electricity Mumbai, Adani Green Energy, and Adani Ports and Special Economic Zone extracurricular of India.

Hindenburg earned $9.2 cardinal erstwhile it took abbreviated positions done exchange-traded funds and options connected the MSCI India Index connected 24 January 2023. Hindenburg's full earnings, according to Sebi, were $14.7 million.

Hindenburg's reply claims it made lone $31,000.

What is the different important revelation successful Hindenburg's reply?

Hindeburg said Kotak Bank created and oversaw the offshore money operation that Kingdon Capital Management utilized to nett from the trade. Sebi's announcement states lone that K-India Opportunities Fund was the offshore entity that traded successful futures of Adani Enterprises shares. Hindenburg said K-India Opportunities Fund stands for Kotak India Opportunities Fund.

How did Kotak India Opportunities Fund work?

Sebi said successful the announcement that the K-India Opportunities Fund Class F was registered connected 4 March 2022, astir 10 months earlier Hindenburg released its study successful January 2023. According to Mint's reappraisal of the Mauritius institution registry, K-India Opportunities Fund Class F was portion of K-India Opportunities Fund, a Mauritius-based entity incorporated connected 20 March 2013.

Sebi said K-India Opportunities Fund Class F had nary "Participating Redeemable Shareholders." Simply put, it was a ammunition entity.

On 20 November 2022, Hindenburg shared a draught study with Kingdon Capital Management. Hindenburg and Kingdon Capital Management signed an statement astir its enactment connected 26 May 2021.

On 28 December 2022, a steadfast owned by Kingdon bought 100% of the ammunition company's shares and started taking abbreviated positions connected futures of Adani Enterprises shares connected 10 January 2023.

How has Hindenburg's latest salvo affected the Adani Group and the shares of its companies?

After it published its study successful January 2013, the Adani Group cancelled a stock merchantability by Adani Enterprises adjacent arsenic the worth of each 10 radical companies crashed by fractional implicit the adjacent 3 months.

However, aft Hindenburg’s latest statement, the shares of Adani Group companies were hardly changed. Shares of Kotak Bank, though, fell 2%.