Adani Enterprises (NSE: ADNAIENT) is up another 16% on Tuesday to give a 45% rise over five days. The cause of this is, as we said about Adani Ent on Monday, the Supreme Court finding concerning the Hindenberg short sellers report. The market is taking the SCs report as stating that there is no substance to the allegations contained in that Hindenberg report. Thus the significant and continuing re-rating of the Adani Group listed companies in general. Adani Enterprises is benefitting the most as it is also the one of those 10 listed companies which suffered the most from the initial allegations.
We have to admit that we're still not sure that the market is reading the Supreme Court's release correctly. But then that's one of the things about markets - the price is the price whatever our opinion.
The claims themselves from Hindenberg were that there were cross shareholdings paid for from hidden loans across the Adani Group companies. One group company would borrow, buy shares in another, this would push the price up. It would then be possible for the second company to borrow more to buy stock in another of the Adani companies and so on. If this were true it would push up the share prices. But it would also make them very fragile. A fall in one could lead to a cascade as security for the loans could be demanded, or their repayment.
Adani Enterprises share price from Google
In one sense we are clearly wrong in what we said yesterday: “Our reading of the Supreme Courts announcement was: “The specific phrasing is: “...it is not possible to conclude that there was a regulatory failure on the price manipulation allegation.” Which isn't, not really, quite and wholly the same as stating that there's no price manipulation as alleged.” We stand by that. There's sufficient ambiguity in that bureaucratic language to say that no specific instance of regulatory failure has been found. That's not the same - to us at least - as saying that Hindenberg is entirely wrong in its allegations.” We're clearly wrong because everyone else clearly believes differently.
That ADANIENT share price rise is quite obviously the result of the market, in general, taking the SC statement as meaning Heindenberg is wrong. Given that prices are what prices are in a market this does make us wrong as to what everyone else believes. Possibly our reluctance is powered by our willingness to believe the original short selling claims. Thus we're finding it difficult to give up on them.
On the other hand the game is not yet over. But whatever our suspicions or beliefs we are clearly out of step with the rest of the market. And it's they that determine prices, not us.
