NEW YORK – January 6, 2023: Nate Anderson works in his office. Anderson exposes corporate fraud and Ponzi schemes through his company Hindenburg Research.
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Hindenburg Research has established itself as one of the most powerful voices in public activist short selling, having depressed the stock prices of several big-name companies in recent years with its blockbuster reports.
The New York-based activist short-selling firm, founded by Nate Anderson, has also gained a reputation for its fearlessness, having gone after billionaires such as Carl Icahn and Gautam Adani, along with regularly making large public bets and risky claims despite a potential minefield. From litigation.
Short selling is the practice of borrowing an asset and selling it in the hope of buying it back at a lower price, thus pocketing the difference and benefiting from the decline in the value of the asset.
In Hindenburg's case, these are usually stocks of companies they consider houses of cards, or in the company's words: “popping bubbles where we see them.”
“With his knack for targeting high-profile companies, Hindenburg's ability to consistently produce impactful, high-quality research belies the demanding, and often ridiculous, landscape of short sellers,” Ivan Kosovic, managing director of the data group Breakout Point, told CNBC via email. Email.
Hindenburg has been a standout performer among short sellers over the past few years, according to Breakout Point data, regularly topping or appearing near the top of the firm's annual list of notable achievers.
NEW YORK, NY – JANUARY 6: Nate Anderson in New York. Anderson exposes corporate fraud and Ponzi schemes through his company Hindenburg Research.
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Kozovic highlighted the “particularly notable” number of high-performing short calls the company makes annually. It said Hindenburg's 10 targets in 2022 saw an average share price decline of 42%, while its seven targets in 2023 achieved an average decline of 36%.
In the first quarter of 2024, Hindenburg boasted two short positions among the top 10 best-performing short positions in the market, as of March 8: US biotech company Renovaro and Swiss-listed fintech company Temenos.
Within three days in mid-February, the two companies became the target of Hindenburg's infamous research reports, in which the company sets a short target and outlines its evidence.
NEW DELHI, INDIA – FEBRUARY 9, 2023: Members of the Indian Youth Congress protest against the central government over the Adani case at the Indian Youth Congress office, Raisina Road, on February 9, 2023 in New Delhi, India. Congress (IYC) has staged a protest demanding an investigation into the fraud allegations leveled against the Adani Group in the Hindenburg research report.
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Both companies denied the allegations in Hindenburg's reports, with Temenos saying in a statement that they “contain inaccuracies and analytical errors, along with false and misleading claims,” and that the company had not been contacted for comment in advance.
On Friday, shares of Polish fashion retailer LPP fell about 30% as a result of the latest Hindenburg attack, in which the Gdańsk-headquartered company was accused of continuing to make money in Russia despite promising to end its operations there after the invasion of Ukraine in 2022. LPP has rejected the allegations. As “part of an organized disinformation attack” seeking to depress its stock price.
“While we use fundamental analysis to help make our investment decisions, we believe the most impactful research results from uncovering hard-to-find information from atypical sources,” Hindenburg says on its website.
These situations include accounting irregularities, bad actors in management or key service provider roles, undisclosed related party transactions, illegal or unethical business or financial reporting practices, or unsound regulatory, product or financial issues. Revealed.
Controversial practice
Breakout Point has tracked 74 short bets on Hindenburg it opened since 2017. Of the 65 positions the company closed, 53 positions saw their target stock price fall, resulting in gains for Hindenburg.
Of the nine positions currently open, seven are in the red, two of which have dropped to almost zero.
Short selling is a controversial practice, because it involves making money from the declining value of someone else's assets. Retail investors have launched campaigns to pressure hedge funds with short positions on certain assets by buying them en masse, in order to drive up the value and force short sellers to buy back shares at a loss or risk losing more money for their clients.
The most famous example of this was in January 2021, when retail traders sent shares of brick-and-mortar gaming retailer GameStop soaring with major repercussions for financial markets.
Biggest Hits
One of Hindenburg's largest recent campaigns focused on a group of companies owned by Indian billionaire Gautam Adani.
In January 2023, Hindenburg published a report accusing Adani Group companies of “blatant stock manipulation and accounting fraud.”
These allegations wiped tens of billions of dollars off the stock values of various Adani companies and sparked an investigation from the Securities and Exchange Board of India. The Adani Group issued a 413-page response denying the allegations and threatening legal action.
Gautam Adani's net worth fell by $6 billion overnight, but the group and his personal wealth have since recovered, with Adani Group's market capitalization doubling from the lows it reached on the back of the short attack.
In May last year, Hindenburg went after famous activist investor Carl Icahn Icahn companiesalleging “inflated” asset valuations and excessive leverage, which also led to a decline in the company's stock price from which it has yet to meaningfully recover.
Icahn responded to Anderson, claiming the report was created “solely” to profit from his short position at the expense of Icahn Enterprises' long-term stakeholders.
Although Icahn and Adani came close to weathering the storm, other Hindenburg attacks revealed existential faults in the targeted companies.
For example, in 2023, the company uncovered what the U.S. Securities and Exchange Commission later deemed fraud at private investment firm Nanban Ventures and Nigerian fintech conglomerate Tingo Group.
Kosovic highlighted that although Hindenburg is best known for its public reporting on short selling, it also plays an important whistleblower role in expanding the scope of scrutiny to include private entities, in some cases.
The company also recently highlighted a series of prominent Chinese companies listed on the Nasdaq, alleging that the high-tech New York Stock Exchange allows for “open and rampant fraud.” All companies involved denied these accusations.
“I believe this ongoing endeavor at Nasdaq nicely highlights Nate Anderson's commitment to transparency and integrity in the financial markets,” Kosovic said.
“Hindenburg Research has injected a breath of fresh air into public short selling, revitalizing a sector that has found itself besieged by SEC investigations and hatred from retail investors.”
