(Short) stock through the heart: Adani guts $3.4bn equity offer as bleeding passes $150bn
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Indian billionaire Gautam Adani’s family of businesses are bleeding out as I write.
The Conglomerate’s combined market losses jumped well past US$100 billion on Thursday night Sydenham time, those losses have proven hard to staunch ever since Adani was the latest major global business to be bushwhacked by the US investment firm Hindenberg Research.
As Gautum himself says below, the Adani Enterprises share sale – almost in the till – is now being canned… but on moral grounds.
Mr. Adani put out this excellent vid overnight before markets opened trying to get out in front of the family of Adani Group companies coming under renewed fire.
Withdrawing the share offering “would have surprised many,” he says betraying an unsuspected gift for understatement. Via Adani/Youtube
Losses across Gautam Adani’s main businesses hit US$107 billion (A$149.3 bn) by 10:30AM Paris time on Thursday.
The fallout from the January 23 release of a fantastically detailed hatchet job from New York’s Hindenburg Research, has had the desired effect, lighting a fire beneath the firm’s short position it concurrently revealed it’d taken across Adani Group companies.
Hindenburg says it has proof the 17.8 trillion rupees(US$218 billion) Group has ‘engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.’
Shares linked to Adani’s mothership Adani Enterprises and its Adani Ports stock and Special Economic Zone assets all began falling sharply last week, as the short-selling investment firm out of New York, shirt-fronted Adani with pretty direct accusations of “brazen accounting fraud, stock manipulation and money laundering.”
Unsurprisingly, the family of companies derided the claims from Hindenburg, which stands to profit if the conglomerate’s shares dive as they’re doing.
Adani said it was ‘deeply disturbed’ by the report, insisting it was ‘nothing but a lie’ the main takeaways from an epic, if unread circa 400-page rebuttal.
Now, Adani’s flagship company, Adani Enterprises, has been forced to to gut its own 200 billion rupee (US$2.4 billion) stock offering. That fully-booked ongoing equity offer was keeping Adani from going into a tailspin, with the reassurances that it had raised the full amount of money, an anchor for aghast stakeholders.
The Wall Street Journal reports Adani Enterprises had already sewn up US$734 million in equity stakes from more than 30 anchor investors. Big, warm and familiar names like Abu Dhabi Investment Authority, and Life Insurance Corporation of India,
Adani explained away the canning of the sale on an “unprecedented” fluctuating market, although there didn’t seem much fluctuation other than a downward spiral.
Taking the little high ground left to him, Adani said that ‘given these extraordinary circumstances, the company’s board felt that going ahead with the issue would not be morally correct.’
The Group has moved to try and convince investors that all is well.
The balance sheet is fat.
The global cache of assets are secure.
The cash continues to flows.
And do please remember the ‘impeccable’ history of paying all the debts on time.
Still. Adani stock plunged 28% overnight, to 2,128.70 rupees (about US$26).
Likewise, Adani-spin offs and the like Adani Ports & Special Economic Zone for one, is down 18%.
The US short-seller claims the Group has gone to ground with investors’ money in the offshore tax havens while key Adani companies were wallowing in “substantial debt.” Hindenberg also says the entire conglomerate is on a “precarious financial footing.”
The stock price in seven Adani businesses have an 85% downside, according to the research, with fundamental basis due to what its researchers are gleefully calling “sky-high valuations.”
The gap may widen too. The volumes across machinery and electricals in India’s exports overtook the legacy textiles and apparel sectors in 2022 with shares of 9.9% and 9.7% respectively, according to S&P Global Intelligence.
India’s trade economy is set for rapid growth in 2023, the firm adds, aided by trade activity as the country diversifies its manufacturing base.
Adani meanwhile has lost a full third of his wealth – circa US450 billion in a few days.
Rapid. But not growth.