Nationalist Narrative, Same Spelling Error: How Fake News Chains on Hindenburg-Adani Used Twitter

Several social media users, including BJP leaders, appear to have been spreading misleading claims, without any evidence, on Hindenburg Research after its report on Adani led to a stock rout.

New Delhi: After Hindenburg Research’s report of its two-year investigation into the Adani Group led to a stock rout, halving the conglomerate’s market value, several allegations against the US-based short seller, on the back of a “nationalist” narrative, have emerged on social media.

Hindenburg accused the conglomerate of stock manipulation, accounting fraud and using offshore entities in tax havens. It also accused Adani of pulling off the “largest con in corporate history”. Adani hit back saying the research report is “malicious”, “baseless” and a “calculated attack on India”.

It further said that it’ll take legal action against the short seller, to which Hindenburg replied saying that it’ll welcome any action and will demand documents in the legal discovery process.

However, it’s not just Adani who’s making it look like a “nationalist” issue instead of analysing the allegations against a company whose stock had surged 1,700% in two years. (Bloomberg had pointed out that Adani’s rise has been similar to Abu Dhabi’s International Holding Co., which, in less than five years, “has gone on from relative obscurity to becoming a $250 billion behemoth”.)

Several social media users appear to have been spreading misleading claims, without any evidence.

Bharatiya Janata Party’s national spokesperson, Sanju Verma, tweeted on February 4 asking Hindenburg whether the Financial Industry Regulatory Authority (FINRA) had banned it.

Within an hour, Pradeep Bhandari, chief executive officer and founder of Jan Ki Baat posted these claims as charges against Hindenburg Research.

Bhandari’s tweet was retweeted by Verma.

The claims were further retweeted by another Bharatiya Janata Party leader, Priti Gandhi.

In September 2022, the Congress had initiated legal action against Gandhi for allegedly “spreading fake and divisive news” to disrupt the Bharat Jodo Yatra.

On February 6, a BJP-affiliated lawyer also posted the same claims.

According to a report in Mint, Hindenburg Research has not been accused or charged with any wrongdoing at present.

There are also no reports saying that their bank accounts were seized or frozen.

Regarding the third claim that they are banned from publishing reports on NYSE, Hindenburg posted about an NYSE-listed company on December 7, 2022, less than two months before the Adani report was released.

An article published in the Atlantic on February 2, 2023, talked about Muddy Waters founder Carlson Block and Citron Research’s Andrew Left being investigated in the US. Both of them are short sellers. This article said that “Nate Anderson [founder of Hindenburg Research] hasn’t received a subpoena or a warrant and is not a current focus of the investigation.”

It’s unclear which ‘criminal inquiries’ the social media claims are talking about.

Hindenburg Research founder, Nathan Anderson, in response to the questions raised in this piece, tweeted saying that the company was never banned by FINRA; their bank accounts have never been seized; and they are not under any investigation.

On Verma’s question on whether the firm is banned from researching on listed companies on NYSE, Anderson tweeted saying “this isn’t a thing.”

I had also tweeted tagging Sanju Verma so that I could reach out to her on the Hindenburg-Adani report. The story will be updated if and when she responds.

Separately, hashtags such as #AdaniFPOFullySubscribed, IndiaINCSupportsAdani were trending on Twitter.

Adani Group’s chief financial officer, Jugeshinder Singh, even likened the participation of Indian investors in the recent sell-off to the colonial-era Jallianwala Bagh massacre by British officials.

Asked why the market believed the Hindenburg report, Adani’s CFO told Reuters: “In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians … So am I surprised by the behaviour of some fellow Indians? No.”

Note here that a Forbes’ analysis revealed that three investment funds with ties to the Adani Group committed to buying up shares as investors in the Adani Enterprises’ share sale. The three firms are: Mauritius-based funds, Ayushmat Ltd and Elm Park Fund, and India-based Aviator Global Investment Fund. These three firms together agreed to buy 9.24% of all shares available to anchor investors.

Anchor investors are allotted shares a day before the share sale opens. Investment by anchor investors instills confidence in the retail investors.

Retail investors, however, stayed away from the share sale, Mint reported. A large portion of the offering was taken up by institutions and existing shareholders including Abu Dhabi’s International Holding Co., the newspaper reported.

Interestingly, concerns regarding Adani Group’s high leverage and accounting standards were raised much before Hindenburg released its report. Since the matter has again been brought to light, some concerns over such a rapid growth, amid the group’s debt-driven expansion, have been raised.

Separately, some social media users tweeted against Hindenburg while making the same spelling mistake, raising questions over coordinated social media activity on the matter. ‘Nation’ was spelled as “Natioin” in all the tweets. All these tweets were trending with #IndiaINCsupportsAdani and #IndiaStandsWithAdani.

Alt News founder Mohammed Zubair tweeted saying a lot of fake accounts were targeting the Hindenburg report by trending a hashtag (#EconomyWillNeverDie) while defending and supporting Adani.

Also read: A Journalistic History of the Adani Group

Short selling Adani

How do these allegations against Adani benefit Hindenburg? According to The Conversation, Hindenburg is not just a research company, it’s an “activist short seller”, with a financial incentive in seeing Adani’s stock price fall.

Hindenburg makes its profits by identifying “man-made disasters floating around in the market”. It bets on the stock falling, then publicises that company’s negatives. The firm had earlier bet against Nikola and Twitter.

Mint reported that only two of the 20-odd companies Hindenburg has targeted in research reports since 2017 have actually sued it for defamation. One of the lawsuits was filed by Bollywood film studio Eros International; it was dismissed in 2019.

Short selling involves borrowing stock you do not own, selling the borrowed stock, and then buying and returning the stock only if and when the price drops.

For instance, an investor borrows a certain number of shares from a broker, and sells these shares in the market for Rs 100. In the future, when the price of the shares fall to Rs 80, then the investor can buy them at a lesser price, return them to the broker, thereby making a profit of Rs 20. Shorting is done when the investor bets that the stock price will fall at some point in the future.

It’s a great way for investors to maximise their profits, but has its own risks.

Active short selling is not necessarily illegal, nor unethical.

The question is, does society benefit from the information produced by such research firms? Exposing fraud is in the public interest, The Conversation said, adding that “if the report is truthful, blaming Hindenburg for Adani’s crash is like blaming an alarm for a fire.”

A Bloomberg analysis by Andy Mukherjee said, “Even for those Indians who don’t have shares in the Adani group, the concern now is the health of their portfolios. With demand for credit in the economy rising after its post-COVID-19 reopening, and lending rates firming up faster than deposit rates, local banks have been standout performers. The Adani saga could reverse that.”

A loss of $2.4 billion in equity pushed some of the Adani Group’s dollar bonds into distressed territory. Adani also had to shelve a Rs 20,000-crore share sale.

Following that, Credit Suisse stopped accepting Adani bonds as collateral for loans from its private clients, Bloomberg reported. Earlier, the bonds were being accepted at a lending value of 75%, and now they have “zero lending value”. Citigroup and Standard Chartered followed suit.

Separately, Gautam Adani’s closeness to Prime Minister Narendra Modi is well-known, though Adani has denied receiving any favours from the prime minister to grow his business empire.

However, surprisingly, it’s unclear how Adani became the chosen investor from India for Sri Lankan projects. (1. After the billionaire was pushed out of the 2019 East Container Terminal at the Colombo Port, he was given the $700 million West Container Terminal project in partnership with Japan. 2. The head of Sri Lanka’s electricity authority, M.M.C. Ferdinando, had testified in parliament that Prime Minister Modi had pressurised President Rajapaksa to hand over the 500 megawatt renewable energy project. Adani has the project. Ferdinando later withdrew his statement, and resigned.)

This story, which was published on February 9, 2023, at 11 am, has been updated at 8:31 pm with Hindenburg Research founder Nathan Anderson’s comments on this piece on Twitter.