Adani Group Selloff Eclipses Enron, Wirecard

• Adani Group companies have lost over $110 billion in market value in the past fortnight. 
• That’s after US short seller Hindenburg Research leveled allegations of market manipulation and fraud at the conglomerate.
• These losses eclipse those at other short seller targets like Enron and Wirecard. 

Very few companies have lost a huge chunk of their market capital as swiftly and to such an extent as those belonging to the Adani Group. 

Ten listed companies under the Adani Group — which came under attack by short seller Hindenburg Research — have already shed more than $110 billion as of Friday, per Bloomberg. These losses eclipse the market capital lost by other targets of a short seller’s attack.

Adani Group’s losses were significantly larger and swifter than the bloodshed at Houston-based energy trading giant Enron and German payments company Wirecard, which were also mired in accounting scandals before they collapsed, according to a Bloomberg analysis published on Friday. While Enron has ceased to exist, Wirecard is now insolvent. 

Enron was brought down — in part — by famed short seller Jim Chanos of hedge fund Kynikos Associates. Chanos shorted the firm’s stock after flagging fraudulent accounting practices. Enron lost more than $65 billion between August 2000 and December 2001 when it filed for Chapter 11 bankruptcy, per Bloomberg’s record.

In Wirecard’s case, it was short seller Fraser Perring, who in a 2016 report, accused the payments firm of money laundering and fraud. Wirecard’s share price collapsed after the company revealed in June 2020 that $2 billion in cash went “missing” from its balance sheet and likely never existed. It filed for insolvency in the same month. Wirecard’s market value was wiped out from 24 billion euros, or $26 billion, in 2018.

Other companies that have lost substantial market value after being targeted by short sellers include electric truck maker Nikola — its market value fell from a high of around $30 billion in 2020 to $1.3 billion now — and Valeant Pharmaceuticals. The latter’s market cap fell from $87 billion in August 2015 to around $2.8 billion now.

Nikola, in particular, was also targeted by Hindenburg Research. The US-based short seller has targeted about 30 firms since 2020, per Bloomberg. These stocks lost about 15% on average the day after being targeted, and were on average 26% lower six months later, according to the news outlet’s calculations.

On its part, the Adani Group has been troubleshooting hard. On January 29, it released a 413-page report defending itself against Hindenburg’s allegation — just three days after saying it was exploring potential legal action against the short seller.

They even sought to restore investor confidence by prepaying $1.1 billion in loans, the conglomerate said in a statement on Monday. It said the move was made “in light of recent market volatility.”

And it seems to be working — most Adani Group-related stocks appeared to be lifted by the news.

The conglomerate’s flagship company, Adani Enterprises surged 20% in under two hours of trade on Tuesday, while those of Adani Ports and Special Economic Zone soared over 9%. Shares of Adani Transmission, Adani Green Energy, and Adani Power were also up. The shares of Adani Total Gas were 5% lower.