A short-seller activist is gaining recognition by challenging Carl Ichan, Gautam Adani, and other prominent figures.

• Over the past few years, data shows that Hindenburg has been a top performer among short sellers.
• The act of borrowing an asset and selling it with the intention of buying it back at a lower price, resulting in a profit from the decline in the asset's value, is known as short selling.
• The practice of short-selling is controversial because it results in profits for the short-seller at the expense of the asset owner's value decline.

In recent years, Hindenburg Research has become a prominent voice in public activist short-selling, using its influential reports to drive down the stock prices of major corporations.

The New York-based activist short-seller, founded by Nate Anderson, is known for its fearlessness and has targeted billionaires such as Carl Icahn and Gautam Adani, as well as regularly launching big public short bets and making serious allegations, despite the potential legal risks.

The act of borrowing an asset and selling it with the intention of buying it back at a lower price, resulting in a profit from the decline in the asset's value, is known as short selling.

In Hindenburg's case, it is usually the shares of companies that it deems to be houses of cards, or in the company's words: "Popping bubbles where we see them."

Ivan Cosovic, managing director of data group Breakout Point, stated in an email to CNBC that Hindenburg's ability to consistently produce high-quality, influential research is in stark contrast to the often ridiculously demanding landscape for short-sellers.

Breakout Point's data shows that Hindenburg has consistently been among the top short sellers over the past few years.

The number of high-performing short calls the firm puts out annually is "remarkably high," according to Cosovic.

In the first quarter of 2024, two of the top 10 best-performing short calls in the market were held by Hindenburg, specifically U.S. biotech Renovaro and Swiss-listed fintech Temenos, as of March 8.

In mid-February, within three days, both companies were targeted by Hindenburg's notorious research reports, which named a short target and presented evidence.

Both companies rejected the accusations made in Hindenburg's reports, with Temenos stating that the report contained inaccuracies, errors, and false claims, and that the company was not consulted beforehand.

On Friday, LPP's shares plummeted by approximately 30% due to Hindenburg's latest accusation that the Gdansk-based fashion retailer was still generating profits in Russia despite pledging to halt operations there following the 2022 Ukraine invasion. LPP refuted the allegations as part of an orchestrated disinformation campaign aimed at lowering its stock price.

While we rely on fundamental analysis to inform our investment decisions, we believe the most valuable insights come from discovering obscure information from unusual sources.

Accounting irregularities, bad actors in management or key service provider roles, undisclosed related-party transactions, illegal or unethical business or financial reporting practices, or undisclosed regulatory, product or financial issues are some of the situations that can lead to legal action.

Controversial practice

Since 2017, Hindenburg has opened 74 short bets on Hindenburg, and out of the 65 positions it has closed, 53 resulted in a decline in the target's share price, resulting in gains for Hindenburg.

Seven of the nine short positions are in the red, with two falling almost to zero.

Controversial short-selling practice involves making money from decline of others' asset value. Retail investors have launched campaigns to pressure hedge funds with short positions against certain assets by buying them collectively, thereby increasing value and forcing short-sellers to buy back shares at a loss or risk greater losses for their clients.

In January 2021, GameStop's shares were driven up by retail traders, causing significant consequences for financial markets.

Biggest hits

Gautam Adani's businesses were the focus of one of Hindenburg's recent campaigns.

In January 2023, Adani Group companies were accused of "brazen stock manipulation and accounting fraud" by Hindenburg.

The allegations led to a significant decline in the stock values of Adani companies, resulting in tens of billions of dollars being wiped off. The Securities and Exchange Board of India launched an investigation into the matter. In response, Adani Group published a 413-page document denying the allegations and threatening legal action.

Despite a $6 billion drop in Gautam Adani's net worth overnight, Adani Group's market cap has since more than doubled, with Adani's personal fortune also recovering.

In May of the previous year, Hindenburg accused Carl Icahn of having "inflated" asset valuations and excessive leverage, which led to a significant drop in the company's stock price. Despite this, the company has not yet fully recovered.

Icahn Enterprises' long-term stakeholders were harmed by Anderson's firm, which created a report solely to profit from its short position on Icahn Enterprises.

Despite Icahn and Adani surviving the crisis, other Hindenburg attacks have exposed critical flaws in the companies they targeted.

In 2023, the company discovered fraud at private investment firm Nanban Ventures and Nigerian fintech conglomerate Tingo Group, which was later confirmed by the U.S. Securities and Exchange Commission.

While Hindenburg is renowned for its public short-selling reports, it also has a significant whistleblowing role, extending its scrutiny to private entities in some cases.

The Nasdaq has been accused of allowing "rampant, open fraud" by a Chinese-headquartered tech company, despite the companies involved denying the allegations.

Cosovic stated that the ongoing Nasdaq project showcases Nate Anderson's dedication to maintaining transparency and honesty in financial markets.

"The public short-selling domain has been revitalized by Hindenburg Research, which has brought a fresh perspective to the sector that had been plagued by SEC investigations and negative sentiment from retail investors."