Hindenburg Research and its tryst with companies

Till a few days back, hardly anyone in the Indian stock market would have known anything about a firm called Hindenburg Research. But today everyone is aware courtesy the New York-based firm’s critical report on Adani Group, which has been in the limelight in the last one year or so for its whopping stock price surge. 

What is Hindenburg Research? 

In its own words, Hindenburg Research is a firm that specialises in forensic financial research that focuses on issues like accounting irregularities, undisclosed related-party transactions, illegal or unethical business or financial reporting practices, and also undisclosed regulatory or financial issues among other things. 

The firm has been founded by Nathan Anderson who, is a Chartered Financial Analyst (CFA) by qualification and has also completed a Chartered Alternative Investment Analyst (CAIA) course. 

Anderson studied at the University of Connecticut and has previously worked with in the fund industry in firms like FactSet Research Systems, Blue Heron Capital, Tangent Capital and ClaritySpring Inc. 

How many companies have Hindenburg targeted through its reports? 

Going by the publicly-available data on its site, the research firm that claims to unearth “man-made disasters floating around in the market,” has released reports on more than 15 companies till date starting 2017. 

While Indian business conglomerate Adani Group is its latest target, the firm was most active in the year 2020 even as the there was a global lockdown on account of the COVID-19 pandemic. 

The research firm has earlier released scathing reports on companies like Nikola, WINS Finance, China Metal Resources Utilization, SC Worx, Predictive Technology Group, SmileDirectClub and Yangtze River Port & Logistics among others. 

How are the companies faring post the Hindenburg reports? 

More often than not, a Hindenburg report was followed by a huge crash in the stock price of the target company. 

In 2020, the firm released reports on as many as seven companies with its report ‘Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America’ grabbing headlines in September 2020. 

The research firm claims to have “called out a vast array of alleged lies and deceptions by Nikola in the years leading up to its proposed partnership with General Motors.” 

Later, the founder of the electric truck maker was convicted by a US jury for alleged fraud activities. Incidentally, the stock, which was trading at around $66 in June 2020, is currently at $2.77. 

In June 2020, it highlighted a non-disclosure related to WINS Finance in the US market and NASDAQ delisted the company four months later allegedly due to the non-disclosure that was highlighted by Hindenburg. 

Similarly, shares of companies like Genuis Brands, China Metal Resources Utilization, Predictive Technology Group and HF Foods have all witnessed a massive fall in the months following a report by Hindenburg. 

Incidentally, all the Adani Group stocks – Adani Enterprises, Adani Ports & Special Economic Zone, Adani Power, Adani Transmission, Adani Green Energy, Adani Total Gas and Adani Wilmar – have taken a huge beating in the last few trading sessions since the Hindenburg report came into the public domain. 

This assumes significance also due to the fact that a Rs 20,000 crore follow-on public issue (FPO) of Adani Enterprises is currently on and the current market price has dipped below the FPO price.

Also read: 'Hindenburg copy-pasted our disclosures, did no research,' says Adani Group CFO Jugeshinder Singh

Also read: Hindenburg's allegations vs Adani's response: Shell companies, money laundering, Vinod Adani's role