Lawyers are known for speaking truth without using actual words. But, as it happens in any profession, the confidence to put things bluntly automatically comes when one starts rising through the ranks. Harish Salve has reached that rank, and he has no problem exposing Hindenburg.
Why is Harish Salve right about Hindenburg?
“No Good Samaritan.” This is the crux of Salve’s analysis of Hindenburg. His experience is not letting him buy the story that Hindenburg’s report on Adani Group is part of saving investors from fraud. Instead, Mr. Salve’s analysis is that Hindenburg’s report did more damage to Indians than any of the alleged mismanagement in the Adani Group.
To be honest, there are facts to back it up. The Hindenburg Group has a reputation for thoroughly studying a company’s financial details. That would be fantastic if they had ever come up with an optimistic report about any company. But, no. Hindenburg is a short-selling company. It translates into them searching for bullshit in any company. And to their credit, they have done that in the past. Even that is acceptable if they had not gone on a witch hunt against the Adani group.
Adani Group was in a transition phase, and during these times, a company’s fundamental financial ratios took a hit. Hindenburg and its owner, Nathan Anderson, knew that. The company still went forward with its report. The report categorically attacks exactly those places where Adani Group was weak. There was no mention of how well the company had done in the past.
Since Hindenburg’s history was credible (before the report on Adani), gullible retail investors blindly trusted them, and sentiments went down. A total of $150 billion was wiped out from the market. Most of it belonged to retail investors like me and you. Since Hindenburg had held a short position, these people benefited hugely from the bloodbath. Other friends of Hindenburg also made fortunes from it. It is nothing but feeding on investors’ misery like a leech.
Outlining its negative consequence, Salve observed, “The middle class investor is petrified that every time he lists in a company, tomorrow if there is another Hindenburg report, by the time it is proved to be false, it is too late; your shares have tanked anyway. We must have some institutional mechanism to say that the people who are making money off this misfortune of the middle class (sic) shareholders are held to account.” The Indian stock market has been on a rally for quite some time now. Regulators are not up for a Hindenburg-type cheap stunt. This is a modern problem, and regulators need to be aware of it.
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