Did Hindenburg, Adani's bete noire, just to a 'Hindenburg on itself'?

Hindenburg Research, the firm that became a household name in India for its attack on Adani enterprises, has dissolved itself. A “Personal Note” by its founder, Nate Anderson, says: “I have made the decision to disband Hindenburg Research. The plan has been to wind up after we finished the pipeline of ideas we were working on. And as of the last Ponzi cases we just completed and are sharing with regulators, that day is today.”He continues, “I write this from a place of joy,” although it is likely that the joy may not entirely be his alone but is likely exceeded by that of his multiple targets. Did Anderson’s activist-short seller tactics backfire, forcing Hindenburg’s disbanding? Could we call this doing a “Hindenburg on itself”? Furthermore, in the high-profile clash between Hindenburg and the Adani Group, can we conclude that it was Adani who emerged victorious? What, finally, has Hindenburg’s exit to do with Donald Trump’s return to the White House as America’s 47th president?We will never have definite answers to such questions, but one clear outcome of Hindenburg’s demise is that its ability to target and harass business houses has come to an end. When it came to how they worked in the field, Anderson himself terms his associates “ruthless assassins”. It would also appear that some of Hindenburg’s activities had the tacit support, if not blessings, of the powers that be. That support withdrawn, Hindenburg-like operatives and short-sellers will find it much more difficult to flourish under the business-friendly Trump 2.0 administration. But even the devil must be given his due. Anderson, who drove an emergency vehicle before he founded his firm, took exceptional risks. He made a name for Hindenburg as the most feared financial research firm in less than seven years with a type of forensic persistence that came to feared and hated in the market. Hindenburg carved a niche for itself by targeting companies suspected of corporate malfeasance. The firm's modus operandi involved extensive investigations into companies, publicizing reports that alleged fraud, mismanagement, or other corporate governance issues. These reports often led to significant stock price drops in the targeted companies, on which Hindenburg capitalized through short-selling. medium117791837The powers that be Where its tactics hit closer home was its highly publicized battle with the Adani Group, one of India’s biggest and most powerful business conglomerates. Adding a political spin to this battle was the perceived closeness of Adani with Prime Minister Narendra Modi. Ironically, this alleged association may have been a significant cause of Hindenburg’s downfall. In January 2023, Hindenburg released a scathing report accusing the Adani Group, led by Gautam Adani, of engaging in “brazen stock manipulation and accounting fraud”, spiralling the conglomerate into a $150 billion market value loss within days. The timing of this report was critical, released just before Adani Enterprises was to launch a massive follow-on public offer (FPO) of $2.5 billion, which ultimately had to be called off due to the market's reaction to Hindenburg's allegations.However, the fallout from this report was not just financial trouble for Adani. The Adani Group responded aggressively, labelling the report as an attack on India, suggesting it was motivated by more than just financial critique but by a geopolitical anti-nationalistic agenda. This narrative gained traction in India, where there was significant pushback against foreign short-sellers influencing local markets. Adani Group's rebuttal was an extensive 413-page document that accused Hindenburg of securities fraud and attempting to destabilize the Indian market for personal gain.The Indian regulatory body, Securities and Exchange Board of India or Sebi, took notice, initiating investigations not only into the Adani Group but also into Hindenburg Research for its market activities. This regulatory scrutiny was intensified when Hindenburg made further allegations in 2024 against Sebi's chairperson, suggesting conflicts of interest, which were met with strong denials and counter legal actions.Hindenburg's approach, while initially successful in exposing discrepancies or fraud in companies like Nikola and Clover Health, began to show cracks. The intense scrutiny and legal battles, particularly with entities as influential as the Adani Group, quite likely led to a significant drain on resources, both financial and reputational. The continuous litigation and counter-litigation, not to speak of regulatory investigations, could have stretched Hindenburg’s operational capacity. Anderson himself cited the intense nature of the work as a reason for disbanding the firm, indicating that the personal toll of such high-stakes confrontations was significant. In addition, the firm had to defend against accusations of market manipulation and the legality of its short-selling tactics, which are often controversial.By attacking a figure like Gautam Adani and key members of his family, who was not only a business titan but also closely associated with India's political leadership, Hindenburg risked exposing itself to powers and forces too big to defeat. The fight became, we can be sure, personal, which possibly alienated the firm from a chunk of its market. After all, those who supported, even profited, from Hindenburg’s bold and brash approach had no interest beyond making money and taking advantage of the firm’s attacks. The narrative that Hindenburg's actions were an attack on India’s growth story did not help. In the direct confrontation between Adani and Hindenburg, it is arguable that Adani emerged stronger. Why? Because the combination of financial clout and political power are hard to overcome. Despite the initial market rout, Adani Group managed to recover partially by attracting new investors, restructuring, and with the Indian government and regulatory bodies showing support or at least not overtly opposing the conglomerate. The narrative of defending national interests and the subsequent legal and public relations manoeuvres helped Adani's image rebound. Moreover, with Hindenburg disbanding, it symbolically and strategically could be seen as a victory for Adani, as one of his most vocal critics will have vanished from the scene.In the Adani vs Hindenburg corporate clash, Adani, by surviving the storm and maintaining his empire, is the clear winner. However, the broader implications for corporate governance, market transparency and the ethics of short-selling remain topics of ongoing debate.