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NEW YORK, Feb. 1 (AP) — Hindenburg Research, a financial research firm with an explosive name and a track record of sending its price targets plunging, is taking on one of the world’s wealthiest men.
Hindenburg was back in the headlines last week after accusing Indian conglomerate Adani Group of a “brazen stock manipulation and accounting fraud scheme”. It cites two years of research, including meetings with former Adani executives and a review of thousands of documents.
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Adani Group has slammed the allegations, saying they are “a malicious combination of selective misinformation and stale, baseless and uncredible allegations which have been tested and dismissed by the Supreme Court of India.”
Still, Hindenburg’s scathing allegations caused the fortune of Adani Group founder Gautam Adani to drop by more than $34 billion in just one week, according to the Bloomberg Billionaires Index. Here are the companies behind all the movements:
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What is it?
Hindenburg says it specializes in “forensic financial research.” In layman’s terms, it looks for corrupt or fraudulent practices in the business world, such as accounting irregularities and bad actors in management.
Where does it get its name from?
The company said it viewed the Hindenburg – the airship that caught fire in the 1930s as it cried “Oh, humanity” – as “the epitome of a wholly man-made and wholly avoidable disaster”. It said it would look for similar disasters in financial markets “before they lure more unsuspecting victims”.
Who else did Hindenburg follow?
Probably the most famous is a 2020 report on Nikola, a company in the electric vehicle industry whose founder Hindenburg called misleading claims of partnerships with top auto companies eager to catch up to Tesla.
Among its charges, Hindenburg accuses Nikola of producing a video to quell suspicions about its truck, which shows the vehicle cruising down a road. Hindenburg said the video actually just shows the truck rolling down the hill after being towed to the top.
What are these allegations about?
For Nikola, a quick scrutiny from the government and investors.
Shortly after Hindenburg’s report, the company and its founder, Trevor Milton, received grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York and the New York County District Attorney’s Office.
The SEC also quickly issued subpoenas to Nikola’s directors.
In October, Milton was convicted of defrauding investors by exaggerating his company’s progress in producing zero-emission 18-wheeler trucks that ran on electricity or hydrogen.
Nikola agreed to pay $125 million at the end of 2021 to settle SEC charges that it defrauded investors by misleading them about its products, technological advancements and business prospects.
What did Hindenburg get out of it?
It can make money. In its Adani report, the firm said it held “short positions in Adani group companies” through bonds traded in the US and other investments traded outside India.
It made similar “short” bets on other companies that have issued unflattering reports. A “short” trade is a way for someone to make money when the price of an investment falls. Later, if a company’s stock or bond prices fell on negative attention to the report, Hindenburg could profit.
Such short sellers have been criticized for unfairly depressing stock prices on potentially baseless allegations. But proponents also say they are a healthy part of the stock market, keeping stock prices in check and preventing them from getting too high. (Associated Press)
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)
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