The Adani Controversy: A Tale of Billion-Dollar Losses and Resilience
Great story to wrap up this intense week - Billionaire Gautam Adani has seen ~$60 billion wiped from his fortune.
Adani Group, is an Indian conglomerate which has lost upwards of $130 billion in market capitalization over the last couple of weeks after activist short-seller Hindenburg Research alleged fraud and stock price manipulation.
As per Hindenburg’s report, a lot of the public shareholders of Adani Group companies are offshore shell companies that are secretly affiliated with, and perhaps controlled, by Gautam Adani, the chairman and founder of Adani Group.
The accusation is - Adani is using these shell companies to pump up the stock price.
Can Gautam Adani save his business? The report lists serious allegations, so only time will tell. He is down but don’t count him out yet, global investors would be wise to remember how resilient Indian businessmen can be.
A case in point is when short sellers tried to squeeze late Dhirubhai Ambani, founder of India’s largest private sector company, Reliance Industries Limited.
After its IPO in 1977, Reliance’s share price steadily climbed upwards. In 1982, Reliance announced a rights issue of partly convertible debentures.
A cartel of bear operators were of the opinion that the management team of Reliance was artificially keeping the prices high, to ensure the rights issue was fully subscribed. They believed the share price was overvalued and started short selling shares of Reliance.
The selling pressure was intense causing the price to tumble quickly.
But then something strange happened. A buying spree began, a group of investors started buying shares and the price began moving upwards.
The bears lost the gamble and had to buy shares at a higher price to close their positions.
It was rumored that Dhirubhai Ambani himself had bought the shares from the bears when the price was low and sold it to them when the price was high.
In business it’s critical the leader has the courage to face impossible situations and see the company through, and so the question remains - can Gautam Adani pull through?
