Adani Enterprises (NSE: ADANIENT) shares are down near 7% in India today and all of the other Adani Group companies have followed it down. The trigger here is SEC and the Brooklyn US Attorney's Office inquiries into what investors were told after the Hinndenberg short selling report.
Note what this is not - it is not an inquiry (or even two inquiries) into the actual allegations that Hindenberg made. As is just and righteous the management of the Indian stock exchanges is for the authorities in India to deal with under Indian law. That's just not something that the SEC or other US authorities would get involved with. However, what Adani Group companies said, in the US, to US investors about that report then does come under US jurisdiction. Given American law it's always possible that too much was said - it's very easy to say too much under US law.
Adani Enterprises share price from Google
Those original Hindenberg claims were significant: “India's Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades, with its founder pocketing over $100 billion in merely three years, a new research shows.” And the share price reaction was significant too.”Under-fire Indian tycoon Gautam Adani's empire has lost more than $100 billion in value over the past week as shares in several firms plunged again Thursday, a day after the group cancelled a multi-billion-dollar public offering.”
To some extent Adani Enterprises has recovered. “Adani Enterprises (NSE: ADNAIENT) is up another 16% on Tuesday to give a 45% rise over five days.”.
But now to the new problem: “US authorities are looking into what representations Adani Group made to its American investors following a scathing short seller's report that accused the company of using offshore companies to secretly manipulate its share prices.
The US Attorney's Office in Brooklyn, New York, has sent inquiries in recent months to institutional investors with large holdings in the India conglomerate, one person familiar with the inquiries said.” The SEC is also asking similar questions.
The point here is not whether those initial Hindenberg claims were true or not because that's not an issue for the US authorities. It's what Adani told them about the claims to pacify them which is the issue. At least, that's the issue so far, for clearly in investigating whether Adani was telling the whole and complete truth to investors it is necessary to work out what the whole and complete truth is that has to be told.
It's possible, of course it is, that the entire set of Hindenberg claims were wrong. But if they were not wrong then now we've an institution entirely outside of any influence of Indian politics having a look. Which might well, if there's anything there, turn up some interesting points.