The market regulator Securities and Exchange Board of India (SEBI) has said Hindenburg Research shared an advance copy of its critical report on Adani Group with New York-based hedge fund manager Mark Kingdon about two months before its public release
File Photo: SEBI
The market regulator Securities and Exchange Board of India (SEBI) has said Hindenburg Research shared an advance copy of its critical report on Adani Group with New York-based hedge fund manager Mark Kingdon about two months before its public release, profiting from a deal to share gains from the resulting share price movements.
In a 46-page show cause notice, the SEBI detailed how the US short-seller Hindenburg, Kingdon’s hedge fund, and a broker associated with Kotak Mahindra Bank benefited from the over USD 150 billion decline in the market value of Adani Group’s 10 listed firms post-publication of the report.
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Further, the market regulator accused Hindenburg of making unfair profits through collusion, using non-public and misleading information to induce panic selling in Adani Group stocks.
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Hindenburg made the SEBI notice public and responded by describing it as an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.
They revealed that the vehicle used to bet against Adani’s flagship firm, Adani Enterprises Ltd, belonged to Kotak Mahindra (International) Ltd, a Mauritius-based subsidiary of Kotak Mahindra Bank Ltd. KMIL’s fund placed bets on Adani Enterprises Ltd for its client, Kingdon’s Kingdon Capital Management.
The notice by Sebi includes time-stamped chats between a hedge fund employee and KMIL traders coordinating the sale of future contracts in AEL. Kotak Mahindra Bank stated that Kingdon never disclosed that they had any relationship with Hindenburg nor that they were acting on the basis of any price-sensitive information.
Kingdon, which had a controlling stake in KMIL’s K-India Opportunities Fund Ltd, had an agreement to share 30 per cent (later reduced to 25 pc) of profits from trading based on the report with Hindenburg. SEBI stated Kingdon transferred USD 43 million in two tranches to build short positions in AEL, squaring off these positions post-report, making Rs 183.23 crore (USD 22.25 million) in profit.
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