In just one week, billionaire Gautam Adani's business empire has come unglued over allegations by a short-seller thousands of miles away.
On Wednesday, Adani abruptly scrapped a $2.5 billion share sale by his flagship Adani Enterprises as an investor panic wiped billions off the value of his companies, which span logistics and energy production.
Adani pulled the deal — the largest offering by a company already listed on India's stock market — even after it was fully subscribed, meaning Adani Enterprises had found enough willing backers to raise the money.
Here's the deal: A tiny but influential New York research firm has publicly accused Adani's conglomerate, and Adani himself, with stock manipulation and fraud — accusations he has forcefully denied.
But the report's claims — including that Adani orchestrated "the largest con in corporate history" — have sent investors fleeing.
The Adani Group's market value has lost $90 billion since January 24, when the New York firm, Hindenburg Research, published its report.
Adani's own personal wealth has cratered in that time, according to the Bloomberg Billionaires Index. In a stunning reversal, all of the $44 billion in wealth he accrued last year has evaporated. He's no longer Asia's wealthiest man (a title now held by his rival, Mukesh Ambani), according to Bloomberg.
Adani Enterprises' stock fell nearly 30% on Wednesday alone, prompting the tycoon to reverse course on the share offering.
"Today the market has been unprecedented, and our stock price has fluctuated over the course of the day," Adani said in a statement. "Given these extraordinary circumstances, the company's board felt that going ahead with the [share] issue will not be morally correct."
BIG PICTURE
The U-turn is a huge setback for one of India's most prominent industrialists, my colleague Mark Thompson reports. Just a week ago, his sprawling group was worth about $200 billion, making him Asia's richest man by a big margin.
The 60-year-old, a college dropout from humble roots, is an ally of Indian Prime Minister Narendra Modi, and investors have been betting on his ability to grow his businesses in sectors that the government has prioritized for development. Shares in some of his companies soared 1,000% over the past few years.
Until last week, Adani had largely shrugged off criticism that his business empire had overextended itself, taking on too much debt to grow rapidly.
Then came the Hindenburg report (which we covered in Monday's Nightcap, ICYMI).
In short: Hindenburg claims the Adani Group engaged in "brazen stock manipulation and accounting fraud scheme over the course of decades." It said it had taken a short position — investor-speak for betting a stock will go down — in some of Adani's US-listed securities.
Adani immediately denounced the report as "baseless" and "malicious," and has said it is considering legal action.
"Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt," he said Wednesday.
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