Nathan ‘Nate’ Anderson founded Hindenburg Research in 2017. , Photo Credit: Getty Images
Short sellers are as old as corporate stocks themselves.
The first known examples of short selling date back to the early 17th century and involve stock in the Dutch East India Company, widely considered the first joint-stock company. According to Ludwijk Petram, a Netherlands-based economist and historian who was featured on US-based National Public Radio’s ‘Planet Money’ show in 2015, Isaac Le Maire, a disgruntled former director of the Dutch East India Company, sought revenge on the company was expelled on the condition that the share price of the company would fall. It is said that he started spreading rumors which were aimed at pushing down the stock price.
The company is reported to have sought a ban on short selling, citing economic injury to the wider public, and a partial ban on short selling and a ban on Le Maire from accessing any of its shares. succeeded, thus foiling the short seller’s plans.
For centuries, short sellers were viewed with suspicion by the establishments of the day, with France’s Napoleon Bonaparte outlawing short selling and considering the activity seditious enough to warrant the imprisonment of short sellers. More recently, in the mid-1990s, a Malaysian finance minister suggested that short sellers be subject to public penalties. And although the idea didn’t become law, the country made it illegal to short sell select companies.
Despite all the indignities, short sellers often serve an important socio-economic function by helping to expose financial irregularities in large and small corporations that have raised capital from the public. Short sellers always invest a lot of time and effort in researching the company they want to short, given that they risk significant financial loss in the event that a company’s share price declines over a given time period. .
From predicting the collapse of the once-mighty energy provider Enron Corporation to accurately predicting the financial meltdown associated with the US subprime mortgage crisis in 2007, short sellers have earned a reputation for serving as an early warning system of corporate and market malfunctions. is of.
Hindenburg Research, a small firm founded by Nathan ‘Nate’ Anderson (pictured) in 2017 and operating out of the Upper West Side in New York City, is a short seller that has built its reputation on its focus on forensic financial research. Over the course of just two months in 2017, Hindenburg published more than four articles on four different Nasdaq-listed companies, including a bitcoin miner and a biotech firm, resulting in charges by the US Securities and Exchange Commission (SEC). filed. Chief executives of these firms.
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The following year, Hindenburg published his first major article on Yangtze River Port and Logistics, a Chinese logistics provider with a market capitalization of then $2 billion. Hindenburg’s investigation into the Nasdaq-listed firm revealed that the company’s key assets did not exist.
While the China-based firm sued the short seller for defamation, Hindenburg stated on its website that “several independent media outlets and a law firm confirmed our reporting”. Yangtze River Port, which lost more than 98% of its market cap, was later delisted from the Nasdaq and a lawsuit against the short seller was dismissed.
It was in 2020, however, that short sellers came into their own, taking down at least seven companies in the same span of months.
Hindenburg’s September 2020 report on electric vehicle maker Nikola Corp titled “Nikola: How to Parlay an Ocean of Lies into a Partnership with the Largest Auto OEM in the US” was its most important investigation until its latest report on the Adani Group.
With the help of whistle-blowers and former employees, the short seller established that Nicola had resorted to numerous falsifications, including in a promotional video for his Nicola One Semi. [truck trailer] He was “nothing more than a truck being rolled off a hill in the Utah desert”. The report led to the resignation of Nicola’s founder and executive chairman, Trevor Milton, last October after a jury convicted Mr Milton of defrauding investors.
Whatever the outcome of the Adani case, Hindenburg’s latest attack has shown that the firm and its founder Mr. Anderson have the appetite to take on the rich and powerful.