All you need to know about Hindenburg, the firm accusing Adani of fraud

Look up the Hindenburg disaster and you’ll come across images of a burning airship from 1937, when a giant gas balloon burst into flames. This catastrophe inspired the stock market tool called Hindenburg Omen, which uses technical indicators to predict a crash in share prices. The phenomenon also lent its name to Hindenburg Research, which has triggered a storm for India’s richest man Gautam Adani, by accusing his firm of market manipulation and fraud.

The man behind the movement

Its founder Nathan Anderson, is a 38-year-old short seller, who has made a career out of exposing companies with dubious dealings, and shorting their stocks. Short selling means borrowing shares and selling them at a higher price while they are rising, only to buy them back when prices crash, before returning them to original owners. The difference is the short seller’s profit, without even having to buy a stock before trading.

Hindenburg’s Nathan Anderson is one of many activist short-sellers who use research to spot fraudulently inflated stocks in plain sight. He sells these shares at higher rates, before publicly revealing the findings, and sells them when the report drags down the stock’s price. He started off by cashing in on the fraud at hydrogen truck-maker Nikola, whose founder Trevor Milton was recently convicted.

Opening a can of worms

In 2020, Hindenburg had released a report that Nikola was built on false claims, which triggered a crash in stock prices and led to an investigation against the firm. That year, the firm admitted that their truck in a viral video didn’t have a hydrogen fuel cell engine, and was just rolling downhill.

In 2021, Anderson unearthed the connection of Colombia-based Tecnoglass, which profited from the pandemic, with a cocaine cartel, triggering a 40 per cent crash in its stock prices.

Early in 2022, Hindenburg blew the lid off biotech firm Enochian Biosciences making false claim about curing coronavirus, and murder allegations against its founder, after which its stocks plummeted by 37 per cent.

Last year, the research firm’s allegation’s of securities fraud against Ebix led to a 40 per cent crash in its stock prices. Later a sessions court in India barred publishing of the report in the country.

Hindenburg has claimed that they spoke to dozens of people along with senior executives who formerly worked at Adani. They also reviewed documents and visited Adani Group’s sites in half a dozen countries. Accusing Adani of fraud, Hindenburg has also posed 88 questions for the conglomerate to come clean, to which the group responded with a single statement calling the report stale and malicious.

Clearing the market clutter

Anderson claims that the stock market in its current state is crazy, when crypto firms are flaunting made-up fortunes, and companies without revenue are scaling high valuations. Hindenburg is simply thriving when spotting red flags right in front of investors all along, counts as detective work.