NEW YORK – January 6, 2023: Nate Anderson works at his desk. Anderson uncovers corporate fraud and pyramid schemes with his company Hindenburg Research.
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Hindenburg Research has established itself as one of the most influential voices in public activist short selling, with its blockbuster reports driving up the stock prices of several big-name companies in recent years.
Founded by Nate Anderson, the New York-based activist short seller has also earned a reputation for fearlessness, having pursued billionaires like Carl Icahn and Gautam Adani and regularly launching large public short bets and serious accusations despite the potential minefield of Litigation.
Short selling is the practice of borrowing an asset and reselling it in the hopes of buying it back at a lower price, thereby pocketing the difference and profiting from the asset’s decline in value.
In Hindenburg’s case, these are typically stocks in companies it believes are houses of cards, or in the company’s words, “popping bubbles where we see them.”
“With a knack for targeting high-profile companies, Hindenburg’s ability to consistently produce high-quality, influential research stands in contrast to the often ridiculously challenging landscape for short sellers,” said Ivan Cosovic, managing director of data group Breakout Point. told CNBC via email.
According to data from Breakout Point, Hindenburg has been a standout performer among short sellers in recent years, regularly appearing at or near the top of the company’s annual list of notable performers.
NEW YORK, NY – JANUARY 6: Nate Anderson in New York. Anderson uncovers corporate fraud and pyramid schemes with his company Hindenburg Research.
The Washington Post | The Washington Post | Getty Images
Cosovic highlighted the “particularly notable” number of high-performing short calls the firm makes annually. Hindenburg’s 10 targets in 2022 saw an average share price decline of 42%, while its seven targets in 2023 saw an average decline of 36%, it said.
In the first quarter of 2024, as of March 8, Hindenburg ranked two short calls among the top ten best-performing short calls on the market: US biotech company Renovaro and Swiss-listed fintech company Temenos.
Within three days in mid-February, both companies became the targets of Hindenburg’s infamous research reports, in which the company names a brief target and lays 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, Raisina Road, in New Delhi, India, on February 9, 2023. The Congress (IYC) staged a protest demanding an investigation into the fraud allegations made against the Adani Group in the Hindenburg research report.
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Both companies denied the allegations in Hindenburg’s reports. Temenos said in a statement that they “contain factual inaccuracies and analytical errors, as well as false and misleading statements” and that the company had not been contacted in advance for comment.
On Friday, shares in Polish fashion retailer LPP plunged around 30% as a result of Hindenburg’s latest attack. The Gdansk-headquartered company accused the company of continuing to make money in Russia despite promising to cease operations there after the 2022 invasion of Ukraine. LPP dismissed the allegations as “part of an organized disinformation attack” aimed at driving down its share price.
Hindenburg says on its website: “While we use fundamental analysis to support our investment decisions, we believe that the most powerful 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.
Controversial practice
Breakout Point has tracked 74 Hindenburg short bets it has opened since 2017. Of the 65 positions the company closed, 53 resulted in a decline in the target company’s stock price, resulting in profits for Hindenburg.
Of the nine currently open short positions, seven of the targets are in the red, two of which have fallen almost to zero.
Short selling is a controversial practice because it involves making money from the loss in value of another person’s assets. Retail investors have launched campaigns to squeeze out hedge funds with short positions against certain assets by buying them en masse to increase the value and force the short sellers to buy back the stocks at a loss or risk making even more money for them losing their customers.
The most famous example of this occurred in January 2021, when retail traders sent shares of brick-and-mortar gaming retailer GameStop soaring, which had a significant impact on financial markets.
Greatest Hits
One of Hindenburg’s biggest recent campaigns focused on a number of companies owned by Indian billionaire Gautam Adani.
In January 2023, Hindenburg released a report accusing Adani Group companies of “brazen stock manipulation and accounting fraud.”
The allegations resulted in tens of billions of dollars being wiped from the stock values of the various Adani companies and triggered an investigation by the Securities and Exchange Board of India. Adani Group released a 413-page response denying the allegations and threatening legal action.
Gautam Adani’s net worth fell by $6 billion overnight, but the conglomerate and his personal wealth have since recovered, with Adani Group’s market cap more than doubling since the lows reached by the short attack .
Last May, Hindenburg took action against famous activist investor Carl Icahn Icahn Enterprisesciting “excessive” asset valuations and excessive debt, which also triggered a collapse in the company’s share price, from which it has not yet significantly recovered.
Icahn hit back against Anderson’s firm, claiming the report was prepared “solely” to generate profits from his short position at the expense of Icahn Enterprises’ long-term stakeholders.
Although Icahn and Adani narrowly weathered the storm, other Hindenburg attacks have exposed existential flaws in 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.
Cosovic stressed that while Hindenburg is best known for his public reports on short selling, he also plays an important whistleblower role in some cases by extending his control to private companies.
The company also recently spotlighted a number of high-profile Nasdaq-listed companies with Chinese headquarters, claiming that the tech-heavy New York Stock Exchange allows “rampant, open fraud.” All companies involved have rejected the allegations.
“I believe this ongoing Nasdaq project clearly underscores Nate Anderson’s commitment to transparency and integrity in financial markets,” Cosovic said.
“Hindenburg Research has brought a breath of fresh air to the public short selling space, revitalizing a sector that has been plagued by SEC investigations and the hatred of retail investors.”
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2024-03-20 06:29:46
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