July 2nd 2024.
In a recent development, Hindenburg Research, a US-based short seller, has received a show cause notice from the Indian markets regulator SEBI for allegedly profiting from a drop in Adani shares. The short seller had previously published a report in January 2023, accusing the Adani group of stock market manipulations and accounting fraud. This report caused a significant decline in the value of Adani's listed companies, resulting in a loss of over $150 billion.
Hindenburg Research has disclosed that it had bets against the Adani group and made a profit of $4.1 million through a single investor relationship. They also earned around $31,000 through their own short position on Adani's US bonds. However, they have not revealed the identity of the investor.
The show cause notice from SEBI, which was received on June 27, has been called out by Hindenburg as an attempt to intimidate them. They have questioned why the regulator did not mention Uday Kotak, the founder of the bank and brokerage firm, who was responsible for creating and supervising the offshore fund used by their investor partner to bet against Adani.
SEBI's notice has been criticized for not naming Kotak and instead using the acronym KMIL, which refers to Kotak Mahindra Investments Ltd. The short seller has also highlighted Kotak's influential position in Indian business, which may have influenced SEBI's actions.
Hindenburg has clarified that their short position on Adani was fully disclosed and that they were working with a single investor partner who was indirectly shorting Adani derivatives through an offshore fund. They have also stated that their work on Adani was not financially beneficial but rather a matter of exposing corruption and fraud by powerful individuals in India.
The short seller has also mentioned their previous report, which uncovered a network of offshore shell entities controlled by Gautam Adani's brother and associates, through which large sums of money were being moved without proper disclosures.
In response to SEBI's notice, Hindenburg has stated that their short position on Adani was well known and not a secret. They have also clarified that they have no operations or employees in India, making the regulator's claims of jurisdiction over them irrelevant.
The show cause notice from SEBI has been labelled as an attempt to intimidate and silence those who expose corruption and fraud in India. Hindenburg has stood by their research and stated that they are proud of their work, despite it not being financially beneficial. They have also highlighted Adani's lack of response to their allegations and the subsequent media reports, which have provided more evidence of wrongdoing by the conglomerate.
In conclusion, Hindenburg Research has denounced SEBI's show cause notice as baseless and an attempt to protect powerful businessmen in India. They have stood by their research and reiterated that their main motive was to expose corruption and fraud in the Adani group.
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