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Source: The post is based on the article “Hindenburg report alleged fraud by its firms, Adani Group says ‘attack on India’” published in Indian Express on 30th January 2023
What is the News?
Adani Group has issued a detailed rebuttal to the allegations of stock manipulation and accounting malpractices levelled by Hindenburg Research. It has dismissed all allegations and called the Hindenburg report as an attack on India and its independent institutions.
What is Hindenburg Research?
Hindenburg Research is a company that specializes in forensic financial research.
It especially looks for accounting irregularities; undisclosed related-party transactions; illegal/ unethical business or financial reporting practices; and undisclosed regulatory, product, or financial issues in companies.
What has the Hindenburg Research report on Adani says?
Hindenburg Research said its two-year investigation has shown that the Adani group was involved in massive and “brazen stock manipulation” and an “accounting fraud scheme”.
Hindenburg, which has short-selling positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments, said key listed companies in the Adani group had “substantial debt” which has put the entire group on a “precarious financial footing”.
What is Short selling?
“Buy low, sell high” is the traditional investment strategy in which one buys a stock or security at a particular price and then sells it when the price is higher, thereby booking a profit. This is referred to as a “long position”, and is based on the view that the price of the stock or security will appreciate with time.
Short selling on the other hand is a trading strategy based on the expectation that the price of the security will fall. While fundamentally it is based on the “buy low, sell high” approach, the sequence of transactions is reversed in short selling — to sell high first and buy low later. Also, in short selling, the trader usually does not own the securities he sells, but merely borrows them.