The Hindenburg gambit

Dhirendra Kumar's August 17, 2024 Editor's Note on Hindenburg's latest campaign elicited a flurry of responses during the week. Whether you agree or disagree, your insights are always sharp and thought-provoking. As a token of appreciation, we have dedicated this section to you - our valued readers.

Summary

Hindenburg Research, known for its negative reports that short overvalued stocks, initially gained support for exposing the Adani Group in early 2023. Many viewed this as financial activism that promoted market transparency. The research firm has now shifted its focus to discrediting SEBI by alleging links between the regulator's chairperson and the Adani Group. Critics argue this is an "attack is the best defence" strategy, aimed at undermining SEBI's credibility while profiting from the Indian market's volatility.

Hindenburg's brazen defiance, including dismissing SEBI's show-cause notice, highlights a deeper issue: a colonial attitude that assumes a Western entity cannot be held accountable by an Indian regulator. The swift acceptance and amplification of Hindenburg's claims suggest a coordinated effort to destabilise Indian markets and institutions. This saga underscores a dangerous phase in India's political discourse, where inflicting institutional damage is seen as a victory for political battles. As global finance, politics, and national institutions intersect more frequently, it's crucial for investors and the public to stay vigilant. The Hindenburg case serves as a cautionary tale, reminding us that financial research can be weaponised for political gains, raising concerns about the potential for abuse and manipulation in an increasingly complex world.

What our readers say

V C Sharma: It was an apt analysis of the situation. Even me and my friend were discussing the same last Sunday. The report is more of an attack instead of a revelation. All the information given is there in the public domain and like you rightly said offence is best defence. To distract all and move away from show cause notice they diverted the attention. Now it is a big question who is behind it?

S Rajagopal: This week's article on the Hindenburg saga presents a balanced view on the controversial subject, particularly from the standpoint of investors. Without forcing a predetermined thought process, valuable points are raised in a succinct way so as to gently prompt the readers to draw their own views. Made a great reading.

Vijay Kumar Joshi: I disagree with you. This report is a sequel to the earlier report of January 23 of Hindenburg Research on Adani Group. That report had a huge impact on Adani Group stocks and our markets. I am of the view that the allegations made in Hindenburg report were very serious and had adequate grounds for a thorough investigation by our regulatory authorities which should have included RBI, ICAI and NFRA in addition to SEBI.

We all know how the corporate world works and what sort of manipulations and malpractices are prevalent. This is due to ineffective monitoring by our regulatory bodies which primarily included SEBI. After Hindenburg report of Jan 23, SEBI had an opportunity and obligation to do a thorough investigation but it did a shoddy job and apparently it was under pressure from some external factors to give a clean chit to Adani Group.

Adani Group's growth story never met the basic fundamental principles of business and valuations had grown to insane and absurd levels. SEBI remained a mute spectator and when it had an opportunity to investigate as per SC orders, it miserably failed or deliberately derailed it. The recent report has tried to expose a nexus that I call "BBPN" ( Businessmen- Bureacrates- Politicians- Nexus) but here again, instead of coming clean, blame is being put on Hindenburg Research. Remember, Caesar's wife must be above suspicion. I only hope that the truth is brought out and our corporates and markets become transparent or else retail investors will lose a big time when the bubble bursts.

Subramanian: First time I totally disagree with your write-up. If allegations are there on SEBI Chairperson, it is imperative to investigate to restore creditability to the institution. The SEBI board or the Finance Ministry should have clarified but not the same person who is being questioned. She had set very high standards for all stakeholders of SEBI, then she should also be subjected to that standard.

What happened to the investigation report in Adani's? Rumours are there that discussions were going to settle the Adani issue with meagre penalties. I am surprised that you are defending the SEBI Chairperson like many market pundits.Whistleblowers should
be respected.

Shiraz Lakhani: Thank you, your article is very balanced and informative as all your articles are always. But Sir, there is no smoke without fire & SEBI could have handled these allegations better. In my opinion, this was a missed opportunity to establish institutional credibility. Way forward should probably be to acknowledge the allegations, provide a reasonable timeline to share preliminary findings and then take this forward. Dismissing the allegations immediately is a poor display of investigative prowess. Reflects panic in the house. This is an art to learn from China.

Anirban De: The investor community should keep their political ideology aside when they look into all such matters. It is very clear whenever Hindenburg questions Adani, a section of investment advisors get uncomfortable. The same investor community never advises to buy Adani stocks, as they know. Why they do not want to advise the same? It is a big contradiction that I do not want to advise buying a stock for reasons known, but I do not want anyone to speak about it publicly. Secondly, everything starts as an allegation, and then an investigation happens. Why are such things written off based on against whom this allegation has happened? "If I like that person, I will not tolerate the allegation," - that's not a fair approach.

Also read: The Hindenburg gambit: short-selling and political meddling