SEBI vs. Hindenburg: Show-Cause Notice Sparks Controversy

Regarding its accusations against the Adani Group, Hindenburg Research has received a show-cause notice from the Securities and Exchange Board of India (SEBI). The Indian multinational was previously accused of illegal activities and manipulating share prices by the US-based short seller. In response, Hindenburg described the notification as an effort to frighten and suppress people who report corruption.

Hindenburg Research Answers to the Notice from SEBI

Declaring in a statement that the show-cause letter was “nonsense,” Hindenburg claimed that its intended goal was to scare anyone who expose corruption by influential Indians. The company highlighted that their initial study contained over 720 citations that provided proof of the Adani Group’s stock manipulation and accounting fraud. Hindenburg has previously revealed that they were short Adani’s stock and anticipated a decline in its price.

The company emphasized that although they did not discover any factual errors in their report, SEBI’s warning detailed possible infractions of Indian regulations. Rather, SEBI objected to the usage of specific terms like “scandal” and the quotation of a person who claimed corruption at SEBI. Hindenburg contended that rather than defending investors, SEBI’s actions appeared to be more concerned with defending large corporations like Adani.

Market Reactions to Allegations

In January 2023, the Adani Group was charged with blatant accounting fraud and stock manipulation in the Hindenburg investigation. As a result, Adani’s companies’ market values significantly decreased, erasing over $150 billion at their lowest point. In spite of these accusations, Adani Group has consistently refuted any misconduct.

After releasing their report, Hindenburg observed that SEBI seemed to put pressure on brokers to liquidate short positions in Adani equities, which in turn created purchasing pressure and stabilized the company’s stock price. The company asserted that SEBI’s unwillingness to look into the matter more was clear, citing the regulator’s statement that doing so may be a “journey without a destination.”

Gains in Cash and Openness

Hindenburg explained that they had just one investor relationship associated with their Adani short position, generating roughly $4.1 million in gross revenue, while discussing the financial profits from their Adani report. They said that the necessity to expose corporate misconduct overshadowed financial rewards as the driving force behind their report.

Hindenburg attacked SEBI for its apparent protection of wealthy Indian businessmen and its lack of openness. The company voiced concerns about SEBI’s strategy, saying it erodes investor confidence and maintains a lack of responsibility in the Indian corporate sector.

The Alleged Role of SEBI in Adani Protection

Hindenburg charged that by ignoring the misconduct shown in their study, SEBI was behaving irresponsibly in its capacity as a securities regulator. The company said that rather than defending investors, SEBI’s measures were more about protecting individuals who were perpetrating fraud. They referenced a plethora of leads and tips they received subsequent to their study, demonstrating pervasive problems that SEBI had neglected to address.

Hindenburg also pointed out that investors might take SEBI’s actions as a sign that there isn’t much protection against fraud in India. They reaffirmed their will to keep up their work in spite of intimidation tactics and stressed their commitment to exposing dishonest business practices around the world.