Adani Power shares fell for a third straight session due to the Hindenburg effect

Since it published a report on January 24 stating that the Adani Group is artificially boosting its share prices and is overvalued by more than 80%, Hindenburg Research, a short-seller based in the United States, has been in the news. 

Fall in Adani group stocks due to the Hindenburg effect

The group's market capitalization has decreased by more than $66 billion since that day. The Forbes list has dropped Gautam Adani, who was the second richest person in the world just a few days ago, to number 7.

The Adani Group issued a 413-page response on Sunday in response to the allegations, stating that the report "is nothing short of a calculated securities fraud under applicable law."

The conglomerate stated, "This is not just an unwarranted attack on any particular company but a calculated attack on India, the independence, integrity, and quality of Indian institutions, as well as the growth story and ambition of India."

Hindenburg stated in response that Adani's response "largely confirmed" its findings and that "fraud can not be obscured by nationalism."

However, Nathan 'Nate' Anderson, the founder of Hinderburg Research, is at the heart of everything that has gone wrong.

Nate Anderson, who is he?

Nate Anderson holds a degree in international business from the University of Connecticut. According to a Bloomberg report, Anderson was always interested in "big questions" as a child.

Anderson claimed on the Bad Bets podcast of the Wall Street Journal that when he was a child, he attempted to persuade an Orthodox Jew rabbi that the Book of Genesis was incompatible with the current theory of evolution.

He worked as an ambulance reporter in Israel from March 2004 to January 2005. After that, he started ClaritySpring, a financial services company, after working in a number of investment firms.

He established Hindenburg Research later in 2018.

"Hindenburg Research specializes in forensic financial research," says Anderson's LinkedIn profile. Over the past decade, we have worked in the investment management industry, focusing on equity, credit, and derivatives analysis. We use fundamental analysis to help us make investment decisions, but we think the most important research comes from finding hard-to-find data from unusual sources.

Quintessential Capital Management founder Gabriel Grego told the Washington Post (WaPo) that Anderson was "an extremely intelligent person" with a "great sense of humor" and that they had previously collaborated on a project together.

"He is extraordinarily productive; "He works very, very, very quickly," WaPo reported him saying.

In 2020, Anderson became famous for publishing a report claiming that Nikola, a manufacturer of electric vehicles, was "misrepresenting" the technology. The US authorities began an investigation, and Nikola's founder Trevor Milton was arrested and found guilty of fraud.

According to reports, Hindenburg stated that the company's employees and whistleblowers assisted with the findings.

The conflict between the two businesses only gets worse as time goes on. The situation may take some time to settle down. However, Anderson is no longer a stranger to Adani and many Indians.

Despite some initial buying, the Indian market traded weakly on January 30 morning. The Nifty rose 0.03 percent to 17,609.95 at 9.30 a.m. As they remained bearish, traders were attempting to sell every rise. After being hammered during the previous week, some of the stocks of the Adani group recovered.

On the options front, the 17,500 strikes saw a lot of put writing as it emerged as a significant support area. As bear pressure increased, the highest call writing was observed at 17,700, followed by 17,500 and 17,600.

Rajesh Srivastava, a Bengaluru-based trader who has sold calls, stated, "I am bearish on the market." Srivastava stated that despite a rebound, he would maintain his short position on Adani Group stocks.

Last week, the stock of Adani Group was hit hard. The price that was set for its follow-on public offering (FPO) was much lower than the share price of flagship Adani Enterprises. The FPO price range of Rs 3,112-Rs 3,276 has not yet been crossed by the price.

Adani Enterprises experienced a prolonged rise in open interest and price. Maximum call writing occurred at the 3000 strikes, presenting a significant obstacle for the stock. Due to the fact that some traders anticipate a rise in the stock price following Adani Group's denial of claims made by US-based short seller Hindenberg Research, put writers were also present at this strike.

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