Last year, Gautam Adani, 60, was the star of all the rankings of the richest people in the world.
He was one of the few billionaires to see his net worth rise sharply as the global economic downturn rattled the fortunes of tech moguls.
Adani, an unknown in the West, saw his fortune increase by $40 billion, according to calculations by the Bloomberg Billionaires Index during a year when Elon Musk, the CEO of Tesla (TSLA) – Get a free reportand Jeff Bezos the founder and president of Amazon (AMZN) – Get a free report suffered some of the greatest losses.
Mark Zuckerberg, CEO of social media giant Meta Platforms (META) – Get a free report had been ejected from the top 20 billionaires.
Adani, the new richest man in Asia, then saw his rise in the elite club of billionaires as an opportunity for him to expand his empire globally and make a name for himself on the international stage. This year should therefore be the year of this strategy. But instead of the coronation he had planned, Adani has been caught in a real nightmare since January 24. This nightmare could have significant consequences on its global expansion ambitions.
New York-based investment firm Hindenburg Research announced on Jan. 24 that it had sold short shares of conglomerate Andani through US-traded bonds and non-India-traded derivatives.
This means that Hindenburg Research, a well-known short seller, is betting on a short-term decline in the prices of these stocks.
The short seller explained that the bet stems from alleged illegal practices by the Indian tycoon conglomerate.
“We uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, which has been going on for decades,” Hindenburg wrote in a report.
“Adani has achieved this gargantuan feat with the help of government facilitators and a cottage industry of international companies that facilitate these activities.”
The report describes a galaxy of fictitious entities based in tax havens – the Caribbean, Mauritius and the United Arab Emirates – controlled by the Adani family.
The Adani Empire denied all of these charges and threatened to take legal action to defend itself.
“The malicious and malicious report published by Hindenburg Research on January 24, 2023 has had a negative impact on the Adani Group, our shareholders and our investors,” Adani Group Chief Legal Officer Jatin Jalundhwala said in a January 26 statement.
“We are evaluating the relevant provisions of US and Indian laws for remedial and punitive action against Hindenburg Research,” he continued.
Adani drops in the rankings
But Hindenburg, who is credited with bringing down Trevor Milton, the founder of electric truck maker Nikola, doubled down.
“Regarding the company’s threats of legal action, to be clear, we would welcome that,” the short seller responded. “We fully respect our report and believe any legal action against us would be without merit.”
So far, investors seem to believe Hindenburg more than Adani Group’s denials.
The Adani empire lost a total of $51 billion in market capitalization in the last two trading sessions following the allegations. Adani Enterprises, the flagship of this empire, for example, lost almost a fifth (more than 19%) of its value on January 27. Units like Adani Green Energy and Adani Total Gas plunged 20%, the daily limit allowed. Adani Power lost 5%. Adani Port’s share price fell by 13.8% and Adani Transmission’s by 19.47%.
As Adani’s net worth is mostly tied to his holdings in these various entities, his fortune has also shrunk by more than a fifth in just three days. He was worth $119 billion on January 24, according to Bloomberg Billionaires Index. But as of January 27, the Indian tycoon was worth just $92.7 billion. He thus lost 26.3 billion dollars in three days, or 22% of his melted fortune in 72 hours.
Adani has dropped down the rankings and now finds himself the seventh richest person in the world after starting the year fourth. If he fails to convince investors very quickly that Hindenburg’s accusations are unfounded, he risks finding himself outside the top 10 in the coming days.
The group promised a detailed response to the short seller’s accusations. But no release date has been officially announced.