A German blimp propelled by hydrogen that was heading into New Jersey in 1937 caught fire and collapsed, killing all 35 people on board. About 100 individuals were placed onto a balloon that contained the universe’s most combustible substance, therefore it may be considered a man-made tragedy. Hindenburg was the name of the airship.
Inception of Hindenburg Research
Eighty years later, in 2017, a University of Connecticut graduate with a degree in international business management established a company called “forensic financial research” that specialised in identifying wrongdoings and frauds at businesses around the world and placing market bets against them. Hindenburg Research is the name of the company founded by Nathan (Nate) Anderson.
Adani Group Impacted badly
The world billionaire index dropped Indian tycoon Gautam Adani four spots last week as a result of a research from Hindenburg Research on his corporate empire that prompted a USD 51 billion sell-off in shares of his group firms.
Adani Group reacts
The research has since been dismissed by the Adani group as being a “malicious combination of selected falsehoods and outdated, unsubstantiated, and debunked charges.” But investors have continued to sell down despite this.
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Adani Group shares tumble
The broader benchmark index, the Sensex, fell by 874.16 points or 1.45% on Friday as shares of Adani Group companies maintained their losing run for the second day. Adani Enterprises fell by a staggering 18.5 percent and Adani Ports & SEZ by 16 percent.
Profile of Hindenburg Research
Hindenburg uses activist short selling, which entails selling borrowed stocks in anticipation of subsequently purchasing them at a cheaper price. Short sellers profit handsomely if prices decline as projected.
Such bets are made by Hindenburg, which invests its own money, based on its research, which seeks out “man-made disasters” such accounting errors, poor management, and hidden related-party activities.
The company is specifically searched for “accounting irregularities; bad actors in management or key service provider roles; undisclosed related-party transactions; illegal/unethical business or financial reporting methods; and undisclosed regulatory, product, or financial concerns.”
Company Website says,
“While we use fundamental analysis to aid our investment decision-making,we believe the most impactful research results from uncovering hard-to-find information from atypical sources,”
Lordstown Motors Corp. (US), Kandi (China), Nikola Motor Company (US), Clover Health (US), and Tecnoglass were among Hindenburg’s previous victims (Colombia).
However, few people have any admiration for short sellers. The activists’ target companies have urged regulators to pursue these short sellers because they may be engaging in insider trading of some kind. Supporters contend that the study actually exposes frauds and benefits investors more than it does them damage.
Man behind steering wheel of Hindenburg Research
Aside from the company’s 38-year-old founder Anderson, who lived in Jerusalem, Israel before returning to the US and starting a consulting position with a financial data company called FactSet before working at broker dealer firms in Washington, DC, and New York, not much is known about the business.
Before starting Hindenburg, Anderson collaborated with Harry Markopolos to look into Platinum Partners, a hedge fund that would later be accused of fraud totaling USD 1 billion. Markopolos had previously exposed Bernie Madoff’s Ponzi scheme.
Anderson worked as a volunteer for a neighbourhood ambulance service while residing in Jerusalem.
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