His attack on Gautam Adani's conglomerate is keeping the world's stock markets on tenterhooks and making Nate Anderson famous. The young short seller is also making the major Swiss banks sweat with his actions.
The Hindenburg exploded while attempting to land in New Jersey in 1937, and the image of the burning airship became an iconic symbol of man-made disasters ever since.
Some 86 years later, the name Hindenburg is once again on everyone's lips, and it is the Asian stock markets that are ablaze. Since the attack by American hedge fund Hindenburg Research, the conglomerate of India's Gautam Adani (pictured below) has lost more than $70 billion in value in just three days.
(Image: Adani Enterprises)
Financial Pros Versus Conglomerate
This is the work of a 38-year-old American who grew up in Connecticut and worked for a time as a student in Israel as an emergency rescuer. Nathan «Nate» Anderson (pictured below) is considered a Wall Street newbie, having only launched his short-selling firm Hindenburg in 2017. According to media reports, the team comprises just five people.
But this David has made a name for himself in recent months as a giant slayer. Targets include Twitter, which is in the hands of the former richest man in the world, Elon Musk. Now the son of a nurse and a teacher is infuriating Asia's richest man. Adani has responded to Hindenburg's accusations, listed on 106 pages, prompting an angry 413-page reply, and is taking the activist's attack as an attack on India.
(Image: Twitter)
A Huge Swindle
The rebuttal of the accusations didn't help and the sell-off of Adani shares continued Monday. That is not only a bad omen but bad timing as well. On Friday, the conglomerate plans to raise about $2.4 billion by issuing new shares. The action is less about money than about the gesture. With the capital increase, Adani wants to refute Hindenburg's accusation the firm is still accessible to international investors.
Still, that is one of Anderson's milder claims against Adani. The short seller accuses the conglomerate of having manipulated balance sheets and share prices for decades and of having committed the «biggest swindle in economic history.»
Attractive Target
With this declaration of war, Hindenburg shook up investors all over the world and caused a tremor in the Indian stock market. Of particular concern are the group's outstanding debts, estimated at over $25 billion, likely to make bankers at UBS and Credit Suisse nervous.
In his response Adani explained in his companies are clients of the two major Swiss banks, among others (graphic below). This may well apply to himself as well. As Asia's richest man, he is likely to be heavily courted by UBS and CS, both of which dominate private banking in the region.
Should the Adani empire waver, there could be consequences for the Swiss institutions. There is a threat of securities write-downs on securities on balance sheets and, in the worst case, on loans. The price corrections to date are deep enough that margin calls on the leveraged assets are plausible. The latter mechanism has repeatedly proven to be a bane for Swiss private banks in their business with rich Asians.
Middle East Rescue
UBS and Credit Suisse have not yet been mentioned in Friday's expected capital increase, according to a report in the «Financial Times» (behind paywall). Others such as Jupiter Asset Management, French banks BNP Paribas and Société Générale, as well as Goldman Sachs, have already been allocated fixed shares.
According to the report, a Middle Eastern savior could also come to the rescue of the Adani Group. IHC, the largest listed company from the Emirate of Abu Dhabi, has already invested around $2 billion in the conglomerate last year.
The emirate is now expected to raise more money to defend these positions. Among the investment partners of the Adani Group is Qatar's sovereign wealth fund QIA, according to the company's letter. QIA is a major shareholder of Credit Suisse.
Dealing With Other Giants
Anderson will probably have to deal with other giants. The American, who specializes in tracking down irregularities and corporate fraud, will probably not be deterred. He has already been rewarded for his persistence, and not just financially. In the summer of 2021, for example, US authorities indicted the founder of the American electric truck manufacturer Nikola after Hindenburg accused the company of price manipulation.
