NEW YORK – January 6, 2023: Nate Anderson works at his desk. Anderson exposes corporate fraud and pyramid schemes through his company, Hindenburg Research.
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Hindenburg Research has established itself as one of the most influential activist voices in short selling, crashing the stock prices of several major companies with its blockbuster stories in recent years.
The New York-based short-selling activist founded by Nate Anderson has also built a reputation for its fearlessness, going after billionaires like Carl Icahn and Gautam Adani and regularly making large public short bets and serious allegations despite a potential minefield . legal proceedings.
Short selling is the practice of borrowing an asset and selling it in hopes of buying it back at a lower price, thereby pocketing the difference and profiting from the decline in the asset’s value.
In Hindenburg’s case, these are usually stocks of companies that it considers houses of cards or, in the company’s words: “Bubbles bursting where we see them.”
“With its ability to target high-quality companies, Hindenburg’s ability to consistently produce high-quality, influential research contrasts with the often ridiculously demanding nature of short sellers,” Ivan Kosovic, managing director of Breakout Point’s data group, told CNBC via email.
According to Breakout Point, Hindenburg has been a standout performer among short sellers over the past few years, regularly topping or near the top of the firm’s annual list of outstanding accomplishments.
NEW YORK, NY – JANUARY 6: Nate Anderson in New York. Anderson exposes corporate fraud and pyramid schemes through his company, Hindenburg Research.
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Kosovich highlighted the “particularly remarkable” number of high-impact short calls the firm makes each year. Hindenburg’s 10 2022 targets saw an average stock price drop of 42% and its seven 2023 targets saw an average drop of 36%, the company said.
As of March 8, in the first quarter of 2024, Hindenburg ranked among the top 10 best performing short calls in the market with two short positions: American Biotechnology Renovaro and Swiss-listed fintech company Temenos.
Over the course of three days in mid-February, both companies were the subject of the now-infamous Hindenburg research reports, in which the firm lays out its short-term goal and provides evidence.
NEW DELHI, India – February 9, 2023: Members of the Indian Youth Congress protest against the central government over the Adani issue at the Indian Youth Congress office on Raisina Road on February 9, 2023 in New Delhi, India. The Congress (IYC) organized a protest demanding an investigation into the allegations of fraud leveled against the Adani group in the Hindenburg research report.
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Both companies denied the allegations contained in the Hindenburg reports, with Temenos saying in a statement that the report “contains factual inaccuracies and analytical errors, as well as false and misleading allegations” and that the firm had not been contacted in advance for comment.
Shares in Polish fashion retailer LPP fell about 30% on Friday in the latest Hindenburg attack. accused the company headquartered in Gdańsk continue to make money in Russia, despite promising to stop operating there after the invasion of Ukraine in 2022. LPP rejected the allegations as “part of an organized disinformation attack” aimed at driving down its share price.
Hindenburg states on its website that “while we use fundamental analysis to make investment decisions, we believe that the most effective research results from discovering hard-to-find information from atypical sources.”
These situations include accounting irregularities, bad actors in management or key service providers, undisclosed related party transactions, illegal or unethical business or financial reporting practices, and undisclosed regulatory, product or financial issues.
Controversial practice
Breakout Point tracks 74 short bets on the Hindenburg since 2017. Of the 65 positions the company closed, 53 saw the target company’s stock price decline, resulting in a profit for Hindenburg.
Of the nine short positions currently open, seven targets are in the red, two of which have fallen to almost zero.
Short selling is a controversial practice because it involves making money from the decline in the value of someone else’s assets. Retail investors have launched campaigns to force hedge funds out of short positions in certain assets by buying them en masse to drive up prices and force short sellers to buy back shares at a loss or risk losing more money for their clients.
The most famous example of this came in January 2021, when retail traders sent shares of gaming retailer GameStop soaring, with major repercussions for financial markets.
Greatest Hits
One of Hindenburg’s biggest recent campaigns focused on a group of businesses owned by Indian billionaire Gautam Adani.
In January 2023, the Hindenburg published a report blaming Adani Group company of “brazen stock manipulation and accounting fraud.”
The allegations led to the loss of tens of billions of dollars from the stock value of various Adani companies and prompted an investigation by the Securities and Exchange Board of India. Adani Group released a 413 page response denying the allegations and threatening legal action.
Gautam Adani’s net worth fell $6 billion overnight, but the conglomerate and his personal fortune have since recovered, with the Adani Group’s market capitalization more than doubling from the lows reached in the short squeeze.
Last May, Hindenburg went after famed activist investor Carl Icahn. Icahn Enterprisesclaiming that assets were “overvalued” and overleveraged, which also triggered a decline in the company’s share price from which it has yet to recover.
Icahn hit back at Anderson’s firm, saying the report was created “solely” to profit from its short position at the expense of long-term Icahn Enterprises shareholders.
While Icahn and Adani nearly weathered the storm, other Hindenburg attacks exposed the existential shortcomings of the target companies.
For example, in 2023, the company uncovered what the U.S. Securities and Exchange Commission later found to be fraud at private equity firm Nanban Ventures and Nigerian fintech conglomerate Tingo Group.
Kosovich emphasized that while Hindenburg is best known for its public reporting of short selling, it also plays an important role in whistleblowing, in some cases extending its scrutiny to private businesses.
The firm also recently focused attention on a number of high-profile Chinese-headquartered companies listed on the Nasdaq, alleging that the tech-heavy New York Exchange is allowing “rampant, outright fraud.” All companies involved have denied the allegations.
“I believe Nasdaq’s continued performance perfectly underscores Nate Anderson’s commitment to transparency and fairness in the financial markets,” Kosovich said.
“Hindenburg Research has breathed a breath of fresh air into the public short-selling space, revitalizing a sector that had been plagued by SEC investigations and hate from retail investors.”