New Delhi: The India Securities and Exchange Board of India (SEBI) has taken forward its investigation into trading surrounding the US short seller’s log against the Adani Group in its 2023 report, which was filed by Hindenburg Research.
SEBI has begun proceedings as it seeks to get its hands on profits it suspects it may have generated with information regarding Hindenburg’s report prior to its release. The new development is coming over two years after the trades were completed.
The controversy has been longstanding and dates back to the publication of a detailed report in January 2023 by Hindenburg Research, alleging that the Adani Group was violating securities regulations and other malfeasance. The Adani Group has refuted the charges. The report caused a huge drop in the Adani Group’s stock shares and erased around $150 billion worth of value at one stage.
SEBI later delved into the trading activity that ensued on the report. There are no records of the investment firm, known as Kingdon Capital Management, holding a short position in the companies involved in the Kotak International investment fund that had established a Mauritius entity before the Hindenburg report, the regulator said in 2024.
These short-selling transactions earned approximately $22.25 million for 6 entities, said SEBI. The regulator believes the trades may have been based on non-public information about the upcoming Hindenburg report. Hindenburg and Kingdon have taken the positions that they are not responsible for anything.
A short position gives the investor the advantage of making money when the equity share price declines. An investor can borrow shares, sell them and then purchase them at a lower price. The profit is the difference.
SEBI is also attempting to safeguard the funds that are associated with trades. So far, the regulator has raised objections to the insolvency proceedings against the Mauritius-based fund where the transactions were made. It has pleaded the government to not transfer or distribute the assets of the fund till SEBI takes up the case for recovery of alleged gains and interest.
In the case, it’s important to Indian regulators as some of the parties are located outside India. SEBI thinks that it has jurisdiction as it is involved in trades relating to Indian stocks.
The latest action by the regulator indicates the Adani-Hindenburg controversy isn’t yet off the table as SEBI had earlier rejected claims by Hindenburg of stock manipulation against the Adani Group.
