The Tribune

By CHRIS ILLING

CCO @ ActivTrades Corp

The ups and downs in the international markets continued last week. Robust economic data fuelled concerns about interest rates but, at the same time, consumer activity remained strong. This created a dilemma for many investors.

The recent zigzag course taken by stock exchanges continued during the middle of last week. Despite a plethora of new economic data, the major share indices worldwide failed to chart a clear line. Yet, over the course of the year, they have increasingly freed themselves from their lows.

However, the once-second wealthiest man in the world has likely experiences two of his worst-ever weeks. It is a financial affair that is second to none. Hindenburg Research and its founder Nathan Anderson, a small financial house from New York that specialises in short selling, accusef the Indian industrial mogul, Gautam Adani, of nothing less than the “biggest fraud in economic history”. For decades, Adani is alleged to have committed “brazen stock manipulation” and financial fraud via his company, the Adani Group, a commodity and industrial conglomerate. Shell companies in The Bahamas, family members in top positions in the group of companies, and falsified balance sheets are said to have obscured reality, covered up debt and thus inflated Adani’s share price up by up to 85 percent.

Since the release of the 100-page report two weeks ago, the Adani Group has lost more than $100bn in market value despite vehemently denying these claims. Mr Adani’s personal net worth has also come under severe pressure. In just seven days, his wealth has shrunk by $50bn. The man who last year was considered the second-richest person on earth has now slipped to 15th place on the well-known Forbes list.

But what is a short seller? These are investors who sell shares without owning them first. To do this, they borrow the stock beforehand for a fee and sell them on. The speculators hope that, if the share price falls, they can buy back the shares at a lower price. The difference between the ‘buy’ and ‘sell’ price minus the borrowing fee is their profit. Short sellers are often small teams that put together devastating reports after months of research. Hindenburg Research states that their team spent around two years researching the Adani Group’s corporate network.

Anderson has repeatedly proven that he can be successful with his reports. Probably his biggest coup so far was the hydrogen truck start-up, Nikola. Using a video, Hindenburg proved that the then- Nikola boss, Trevor Milton, simply rolled a hydrogen truck downhill, although he claimed that the drive would work long ago. The start-up’s stock lost two-thirds of its value and Milton lost his job.

It is far from clear whether Gautam Adani will recover from the attack. What is clear, however, is that Anderson may already have solid gains on his short positions. Last year alone, short sellers made $300bn in profit betting on falling prices. For its part, Adani Enterprise cancelled a planned $2.5bn share offering in the wake of the attack. It remains an up and down on the markets.