SEBI Issues 'Show Cause' Notice To Hindenburg Research For Report On Adani Group, Short-Seller Responds

The US-based short seller revealed that the notice highlighted suspected violations of Indian regulations and alleged the short seller of misleading the readers

Hindenburg Research informed on Tuesday that it received a ‘show cause’ notice from the Securities and Exchange Board of India (SEBI) on June 27, 2024. The US-based short seller revealed that the notice highlighted suspected violations of Indian regulations and alleged the short seller of misleading the readers.

"During investigation, it was observed that the Hindenburg Report contained certain misrepresentations/inaccurate statements. These misrepresentations built a convenient narrative through selective disclosures, reckless statements, and catchy headlines, in order to mislead readers of the report and cause panic in the Adani Group stocks, thereby deflating prices to the maximum extent possible and profit from the same," SEBI's notice read.

Hindenburg's Response

Sharing the 46-page notice in detail, Hindenburg said, “Today we are sharing the entirety of this notice, frankly because we think it is nonsense, concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.”

Further, the short seller alleged that the markets regulator provided support to Adani Group after the January 2023 report from the former was released. “Our understanding from discussions with sources in the Indian market is that Sebi's surreptitious aid of Adani commenced almost immediately post-publication of our January 2023 report,” Hindenburg said via a blog post on Tuesday. 

The short seller claimed that after its report, it found that the markets regulator pressured brokers ‘behind the scenes’ to close their short positions in the Adani Group and threatened them with extensive, time-consuming, and expensive investigations if they didn’t adhere. This effectively created a buying pressure and set a ‘floor’ for the conglomerate’s stocks at a key time, the short seller said.

Hindenburg said that after the apex court urged the regulator to investigate the allegations made against the Adani Group last year, the body agreed with many major findings of the report. However, later SEBI said that it was ‘unable to investigate further’, the research agency pointed out.

It further added that the conglomerate’s CFO, Jugeshinder Singh, last month said that some notices from the regulator for the Adani Group were ‘trivial’. Hindenburg added that, “This confidence may be derived in part through Adani’s relationship with SEBI.”

Hindenburg asserted that it would file a right to information (RTI) application to seek the information of SEBI employees who were assigned to work on both the Adani case and the Hindenburg case. Further, it will seek details about meetings and calls between the conglomerate and the capital markets regulator. 

“We will await Sebi's response on whether it will provide basic transparency on its investigations,” the short seller noted.