Hedge Fund’s Secret Adani Short Revealed in Blow-by-Blow Account

-- An activist short-seller, a New York hedge fund, a Mauritius-based investment vehicle and a broker tied to a big Indian bank: All played a role in one of the most-damaging short-seller attacks anywhere in the world.A fresh war of words between the short seller — Hindenburg Research — and India’s markets regulator has thrown up an intriguing cast of characters behind the scathing report and related bets against the Adani Group that wiped out as much as $153 billion in market value last year.

“Pre-release sharing of research with select investors is not uncommon industry practice, particularly among short-sellers,” said Kher Sheng Lee, Asia-Pacific co-head of the Alternative Investment Management Association. “The legality of such sharing is fact-sensitive, with a focus on whether there was intent to manipulate markets or engage in insider trading.”

A sweeping US effort to examine relationships between hedge funds and skeptical researchers began rattling the industry three years ago as investigators set out to gather intelligence on money managers and activists. Kingdon is one of the oldest hedge funds in the industry. Started by Mark Kingdon in 1983 with $2 million, its assets grew to $7 billion in 2007. Kingdon’s Brooklyn-born founder started penning investment newsletters as early as his high school years. He took sole control of running the main fund in 2018 after investment losses and investor withdrawals prompted the liquidation of its credit pool.

Much of the Sebi notice is also devoted to what the regulator considers misleading aspects of Hindenburg’s initial report alleging fraud at the ports-to-power Adani Group.“These misrepresentations built a convenient narrative through selective disclosures, reckless statements and catchy headlines in order to mislead readers of the report and cause panic in Adani group stocks, thereby deflating prices to the maximum extent possible,” Sebi noted.

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