The money man behind Hindenburg’s Adani trade
The silent partner to the trade that rocked Adani
When Nathan Anderson of Hindenburg Research unveiled a detailed bet against Gautam Adani’s group of companies in January 2023, the feared short seller conceded he likely wouldn’t make a massive profit off an investment that rocked the empire of one of India’s richest men.
On Monday, Anderson laid out the relatively paltry windfall from his bet against Adani Group, stating he’d earned just over $4mn for his bets against the parent company.
The gain is small when compared with the impact of Hindenburg’s report, which accused the conglomerate of moving billions of dollars in and out of Adani-controlled entities, often without disclosure.
Though Adani vehemently denied Hindenburg’s claims, it sent the group’s shares into a free fall, shaving billions from the fortune of the world’s then third-richest man.
Adani’s extensive ports, power and infrastructure empire pulled a $2.5bn share sale plan and saw $140bn wiped off its market value.
There was other money made on the trade, however.
In a blog post on Monday, Anderson disclosed that India’s main securities regulator had issued a “show cause” notice to the US-based hedge fund, often the precursor to a formal regulatory action.
In the 46-page notice, the regulator named US hedge fund Kingdon Capital Management as a silent partner to Hindenburg’s short bet against Adani, reports the FT.
For years, it has been known that Anderson, a dogged researcher who has successfully taken on companies such as hydrogen truck seller Nikola Motors and Carl Icahn’s public holding company, has worked with partners to finance his trades due to his firm’s small size. Activist short sellers tend to sell research to third parties who in exchange provide cash to execute their trades.
Many on Wall Street have wondered how Hindenburg put on his trade and who backed him.
Kingdon is an established New York-based hedge fund founded in 1983 and owned by financier Mark Kingdon. It is one of Wall Street’s oldest hedge funds, but has seen assets shrink from nearly $5bn after the 2008 financial crisis to $640mn as of March.
According to the regulator’s report, Kingdon stood to make about 70 per cent of the gains from Adani, while Anderson’s cut was about 30 per cent.
After expenses related to its two-year investigation into Adani, “we may come out ahead of break-even on our Adani short”, said Hindenburg.
In its notice, the regulator said Hindenburg “deliberately sensationalised and distorted certain facts”. (Shares in Adani group have recovered most of their value).
Hindenburg called the allegations “an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India”.
It pointed to numerous media reports that have brought new colour to Adani’s operations, including a number of FT investigations.
The probe has also roped in one of India’s largest banks. Kotak Mahindra Bank “created and oversaw the offshore fund structure used by our investor partner to bet against Adani”, Hindenburg said.
Kotak Mahindra International Limited and its K-India Opportunities Fund “unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the fund. The fund was never aware that Hindenburg was a partner of any of its investors,” it said.