(Bloomberg) -- US short seller Hindenburg Research LLC is targeting Asia’s richest man with accusations of market manipulation and fraud after a run of often-successful bets against companies ranging from electric-vehicle maker Nikola Corp. to Twitter Inc.
The firm run by Nate Anderson published an almost 100-page report on Gautam Adani’s Adani Group, sending shares of the Indian group’s companies tumbling Wednesday. Hindenburg said it’s short Adani securities via derivatives and US-traded bonds. Adani Group rejected the accusations as “baseless” and “selective misinformation.”
Hindenburg has targeted about 30 companies since 2020, and their stocks on average lost about 15% the next day, according to calculations by Bloomberg News. The shares on average were down 26% six months later.
Even as Adani disputes the allegations, some fund managers are likely to bail out of Adani stocks because of the heightened focus on environmental, social and governance criteria.
“Given Hindenburg’s reputation, one can assume that these allegations have been thoroughly researched,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM GmbH.
With the campaign, Hindenburg is taking on its biggest target by far and making a foray into Indian stocks that’s rare for a US short seller. Anderson’s most high-profile short attack targeted electric-vehicle maker Nikola, which he accused of “an ocean of lies.”
Anderson’s firm follows the standard procedure for a so-called activist short: After researching a potential target, Hindenburg places a bet that the stock will decline, then trumpets its research publicly, using social media to get the message out. Hindenburg’s Twitter account has more than 259,000 followers, while Anderson’s personal handle has another 26,500.
Activist shorts hold themselves out as watchdogs who protect investors from accounting and management misdeeds, while the companies they target typically accuse them of market manipulation.
Regulators often have pushed back against short sellers, and the US Justice Department in 2021 collected information on dozens of investment firms and researchers as part of a sweeping hunt for potential trading abuses by shorts, according to people with knowledge of the matter. No charges have been announced from the investigation.
Hindenburg wasn’t immediately available to comment on its track record. Adani Group’s chief financial officer said the research was a “malicious combination of selective misinformation and stale, baseless and discredited allegations.”
Here’s a look at some of Hindenburg’s notable short targets:
- Anderson took an interest in Nikola after Bloomberg News published a story on how founder Trevor Milton had exaggerated the capability of his debut semi truck. Nikola, which at one point had a $34 billion market value, is now worth $1.3 billion, and a jury in October convicted Milton of defrauding investors. The stock has tumbled more than 94% since the short seller’s report.
- Hindenburg also targeted Lordstown Motors Corp. for misleading investors on its demand and production capabilities. The company later confirmed it had disclosed inaccurate information about interest from potential customers. The company, once valued at more than $5 billion, is now worth less than $260 million. Its share have fallen more than 90% since the Hindenburg report.
- The short seller in July 2020 questioned the “astronomical” market value of another EV company, Workhorse Group Inc., and said it had long odds of winning a mail truck contract from the US Postal Service. It failed to win the contract. The company’s market value has slumped to $332 million from $1.5 billion since Hindenburg tweeted out its warning.
Twitter: First Short, Then Long
- Hindenburg also made bets on both a decline and increase in Twitter’s stock as it went through dizzying swings before Elon Musk closed his acquisition of the company. Twitter dropped from $49.80 the session prior to Hindenburg announcing its short to $37.39 on May 16. The following day, Anderson tweeted that Hindenburg had closed out of its position. In mid-July, when Twitter’s stock price was around its low point during the Musk deal saga, Hindenburg announced that it had taken what it called a significant long position.
Targeting the SPACs
- DraftKings Inc. and Clover Health Investments Corp. were some of Anderson’s high-profile bets against firms that went public via special-purpose acquisition companies. The short seller said in June 2021 that insiders at DraftKings made profits on the deal announcement with a blank-check firm, among other allegations. The stock has fallen more than 70% since then. The sports-betting company, which denied wrongdoing, received a subpoena from the US Securities and Exchange Commission in July 2021 seeking documents concerning those allegations.
- Clover Health, backed by venture capitalist and SPAC mogul Chamath Palihapitiya, has fallen more than 90% since Hindenburg published a report in February 2021 alleging the company had misled investors. The SEC began an investigation after the report, which the company said was full of inaccuracies.
Here are some stocks on which Hindenburg issued short-seller research reports since 2020:
--With assistance from P R Sanjai, Jan-Patrick Barnert, Ksenia Galouchko and Abhishek Vishnoi.
(Updates to add background on Hindenburg short positions)
©2023 Bloomberg L.P.