Last year, Gautam Adani, 60, was the star of all the rankings of the biggest fortunes 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 tycoons.
Adani, an unknown in the West, saw his fortune increase by $40 billion, according to the calculations of the Bloomberg Billionaires Index during a year when Elon Musk, the CEO of Tesla (TSLA) – Get Free Report, and Jeff Bezos the founder and chairman of Amazon (AMZN) – Get Free Report have suffered some of the biggest losses.
Mark Zuckerberg, the CEO of the social networking giant Meta Platforms (META) – Get Free Report had been ejected from the top 20 billionaires.
Adani, the new richest man in Asia, then saw his rise in the billionaires elite club as an opportunity for him to develop 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 Jan. 24. This nightmare could have important consequences on his ambitions of global expansion.
Serious Allegations
The New York investment firm Hindenburg Research has announced, on Jan. 24, that it shorted stocks of the Andani conglomerate through U.S.-traded bonds and non-Indian-traded derivative instruments.
This means that Hindenburg Research, a well-known short-seller, is betting on a short-term drop in the prices of these equities.
The short-seller explained that the bet stems from alleged illegal practices on the part of the Indian tycoon’s conglomerate.
“We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades,” Hindenburg wrote in a report.
“Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities.”
The report describes a galaxy of shell entities based in tax havens — the Caribbean, Mauritius and the United Arab Emirates — controlled by the Adani family.
The Adani Empire has rejected all these accusations and threatened to resort to the legal process to defend itself.
“The maliciously mischievous, unresearched report published by Hindenburg Research on 24 Jan 2023 has adversely affected the Adani Group, our shareholders and investors,” said Adani Group’s head of legal, Jatin Jalundhwala, in a statement on Jan. 26.
“We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research,” he continued.
Adani Drops in the Rankings
But Hindenburg, which 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 it,” the short-seller reacted. “We fully stand by our report and believe any legal action taken against us would be meritless.”
Investors so far seem to believe Hindenburg more than Adani Group’s denials.
The Adani empire has lost a total of $51 billion in market capitalization during the last two trading sessions following the allegations. Adani Enterprises, the flagship of this empire, for example, lost nearly a fifth (more than 19%) of its value on Jan. 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 dropped 13.8% and Adani Transmission fell 19.47%.
As Adani’s net worth is primarily tied to his holdings in these various entities, his fortune too has shrunk by more than a fifth in just three days. He was worth $119 billion on Jan. 24, according to Bloomberg Billionaires Index. But as of Jan. 27, the Indian tycoon was worth just $92.7 billion. He thus lost $26.3 billion in three days, or 22% of his fortune melted in 72 hours.
Adani has fallen 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 has promised a detailed response to the accusations of the short-seller. But no release date has been officially announced.