NEW YORK – January 6, 2023: Nate Anderson works at his desk. Anderson exposed corporate fraud and Ponzi schemes through his firm, Hindenburg Research.
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Hindenburg Research has become one of the most powerful voices in public aggressive short selling, pummeling the share prices of several high-profile companies in recent years with its blockbuster reports.
The New York-based activist short-selling outfit, founded by Nate Anderson, is also known for its fearlessness, pursuing Carl Icahn and Gautam Adani billionaires and regularly launch massive public short bets and serious accusations, despite the potential minefield of lawsuits.
Short selling is the act of borrowing an asset and selling it in the hope of buying it back at a lower price, thereby pocketing the difference and profiting from the decline in the asset’s value.
In Hindenburg’s case, that’s often stock in companies it considers to be houses of cards, or in the company’s words: “popping bubbles where we see them.”
Ivan Cosovic, managing director of data group Breakout Point, said: “Hindenburg is good at targeting well-known companies and can consistently produce high-quality, impactful research, which is in line with the requirements of short sellers. The contrast is stark, and short sellers’ demands are often ridiculous,” he told CNBC via email.
Hindenburg has been a top performer among short sellers over the past few years, often at or near the top of the firm’s annual list of top achievers, according to Breakout Point.
NEW YORK, NY – JANUARY 6: Nate Anderson in New York. Anderson exposed corporate fraud and Ponzi schemes through his firm, Hindenburg Research.
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Kosovich emphasized that the number of high-performing short call options issued by the firm each year is “particularly striking.” Hindenburg’s 10 2022 price targets average a 42% downside, while its seven 2023 price targets average a 36% downside.
As of March 8, Hindenburg had short positions on two of the market’s 10 best-performing call options in the first quarter of 2024: American biotechnology company Renovaro and Temenos, a Swiss-listed fintech company.
Over the course of three days in mid-February, both companies were targeted by Hindenburg’s infamous research report, in which the company specified a short-term goal and laid out its evidence.
NEW DELHI, INDIA – FEBRUARY 9, 2023: Members of the Indian Youth Congress protest against the central government over the Adani issue at the Indian Youth Congress office at Raisina Road in New Delhi, India on February 9, 2023. The Congress (IYC) has launched a protest demanding an investigation into the fraud allegations against the Adani Group in the Hindenburg Research report.
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Both companies deny the allegations in the Hindenburg report, with Termenos saying in a statement that the report “contains factual inaccuracies and analytical errors, as well as false and misleading allegations” and that the company had not been contacted for comment in advance. .
Shares in Polish fashion retailer LPP plunged about 30% on Friday amid Hindenburg’s latest attack. Charges against Gdańsk-based company Despite promising to cease operations in Russia after the invasion of Ukraine in 2022, it continues to make money in Russia. LPP dismissed the accusations as “part of an organized disinformation attack” aimed at lowering its share price.
Hindenburg says on its website, “While we use fundamental analysis to aid our investment decisions, we believe the most impactful research results come from uncovering hard-to-find information from atypical sources.”
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 undisclosed regulatory, product or financial issues.
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Breakout Point has tracked 74 Hindenburg short positions opened since 2017. Of the 65 positions the firm has closed, 53 have seen their price targets fall, resulting in gains for Hindenburg.
Of the nine short positions currently opened, seven targets are in the red, and two of them fell to almost zero.
Short selling is a controversial practice because it involves making money from the decline in the value of other people’s assets. Retail investors have launched campaigns to squeeze hedge funds by buying short positions in certain assets en masse, driving up values and forcing short sellers to buy back shares at a loss or risk losing more money for their clients.
The most famous example came in January 2021, when retail traders caused the stock price of brick-and-mortar gaming retailer GameStop to surge, with major consequences for financial markets.
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One of Hindenburg’s biggest recent campaigns has centered on a string of businesses owned by Indian billionaire Gautam Adani.
January 2023, Hindenburg Publishes report accusing Adani Group The company engaged in “blatant stock manipulation and accounting fraud.”
The allegations wiped tens of billions of dollars off the value of Adani’s companies’ stock and triggered an investigation by the Securities and Exchange Board of India.adani group Published 413 pages of response Denies the accusations and threatens legal action.
Gautam Adani’s net worth fell by $6 billion overnight, but the group and his personal wealth have since recovered, with the Adani Group’s market capitalization falling from the lows it reached following the short-selling attack Points more than doubled.
Last May, Hindenburg went after prominent activist investor Carl Icahn Icahn Enterprisesalleging “exaggerated” asset valuations and excessive leverage, also triggered a plunge in the company’s stock price, which has not yet recovered significantly.
Icahn hit back at Anderson’s firm, claiming the report was compiled “solely” to make profits from its short positions at the expense of long-term stakeholders in Icahn’s businesses.
While Icahn and Adani have just weathered the storm, other Hindenburg attacks have exposed flaws in targeted companies.
For example, in 2023, the company discovered what the U.S. Securities and Exchange Commission later deemed private investment firms Nanan Ventures and Nigerian fintech group Tingo Group.
Kosovich emphasized that while Hindenburg is best known for its public short-selling reports, it also plays an important whistleblower role in extending scrutiny to private entities in some cases.
The firm has also recently focused on a string of ambitious Chinese companies listed on Nasdaq, claiming the tech-heavy New York exchange allowed “rampant, open fraud.” All companies involved have denied the accusations.
“I believe this ongoing effort by Nasdaq is a good example of Nate Anderson’s commitment to transparency and integrity in financial markets,” Kosovich said.
“Hindenburg Research has breathed a breath of fresh air into the world of public short selling, reinvigorating an industry that had been beleaguered by SEC investigations and the animosity of retail investors.”
