The Adani Group has lost billions of dollars following allegations of “a brazen stock manipulation and accounting fraud scheme over the course of decades”. Adani owns a coal export terminal and a controversial coal mine development in Queensland. Some of the allegations relate to these assets. The Adani Group denies the allegations, calling them “malicious”. However, it was today forced to cancel a planned stock offering as its value tumbles.
Adani is a global corporation specialising in transport and commodities. It is worth hundreds of billions of dollars. Its founder, Gautam Adani, is one of the world’s richest people. Adani operates Queensland’s Abbot Point coal export terminal. It also developed the major Carmichael coal mine and rail project in Queensland’s Galilee Basin. The project has drawn a major protest campaign (‘Stop Adani’) over its environmental impact and lack of consent from Traditional Owners.
What is alleged?
It is alleged that the Adani Group maintains a “vast labyrinth” of “shell” companies across the world which it uses for improper purposes. Shell companies get their name because they are effectively empty, often with no staff or address. They are usually based in places which allow them to disclose little about their finances and can be used to avoid tax or hide illegal activity. It’s alleged Adani has used these companies to illegally hide debts, falsify transactions and buy its own shares to inflate their value.
What does this mean? Australian allegations:
A number of allegations relate to Adani’s Australian operations. Hindenburg suggests an Adani shell company paid over $AU150m to use Adani’s own Queensland coal terminal. It’s also suggested Adani shell companies spent hundreds of millions to pay off debts and hide losses from the Australian operations. These would have the effect of making the Australian operations appear more profitable to investors than they are in reality.
Who made the allegations?
The allegations were made in a report by the U.S. investor research company Hindenburg Research. Hindenburg aims to warn the public about companies it calls “man-made disasters”. It makes money by purchasing ‘shorts’ in the companies it exposes (shorts are financial assets that make money when a company loses value). Hindenburg owns shorts in Adani so is likely to have profited from Adani’s loss of value following its report.
Adani issued a lengthy response to the report and strenuously denies allegations of wrongdoing. It called Hindenburg’s report “maliciously mischievous” and “unresearched”. It accused Hindenburg of having a financial conflict of interest and deliberately seeking to “mislead” the public. It is considering legal action. It is not the first time allegations of improper behaviour have been levelled at Adani – it has been subject to numerous official fraud investigations before.
Adani’s share value lost tens of billions of dollars in value following the publication of Hindenburg’s report. There have also been financial consequences for other Indian-based companies. Adani announced yesterday it would abandon a planned multi-billion dollar share offer because of the “volatility”. It had previously promised to proceed with this share offer in the days after the publication of the Hindenburg report.