SEBI accused of pressuring brokers to close short positions by Hindenburg

The American short-selling firm, Hindenburg Research, claims that the Securities Exchange Board of India (SEBI) told brokers, who rallied to buy shares to cover short sales in Adani stocks that an investigation was imminent.

However, after coming into the market limelight in January 2023 after releasing a 106-page report, the US entity beard that the Indian regulator was undertaking this act with an intention to enable the creation of a floor price for the stocks that were being sold aggressively after the release of the report in January.

In fact, the effect of the report was so dramatic that the market capitalization of the entire Adani Group lost around $150 billion within a couple of weeks after the report was published.

Hindenburg further accused that “after the publication of the report, SEBI came into the picture to exert pressure on brokers to close bearish positions in Adani under the guise of an expensive and infinite investigation, which created buying pressure and put a check on the free fall of Adani’s stocks during this period.”

It also added that the Indian capital market regulator at first had several key findings in our report, but later, when it was forced by the public and the Supreme Court of India to probe into the matter, it “seemed to have stumbled.”

“The whole concern raised by SEBI (and this is before the Hindenburg report) is that SEBI can never be satisfied that the source of funds to the FPIs is not connected to Adani,” the blog added while quoting the Supreme Court matter reports.

However, the US-based research firm added that SEBI had later stated that it could not investigate further, and the court records depicted how SEBI had chosen to ‘turn a blind eye’ and said that if further inquiry could be one ‘journey without a destination’ it was incapable or indisposed of investigating serious charges against Adani.

The new revelations have emerged just as the Indian regulator served a show cause notice to Hindenburg, which has accused Hindenburg of various wrongdoings and violations.

The US entity has described the Sebi notice in various terms, among them being nonsense and concocted.

Hindenburg Research published a report on January 24, 2023, regarding Adani Group companies for stock manipulation and accounting frauds just before Adani Enterprises proposed a Rs 20,000 crore share sale. The conglomerate dismissed the findings of the said report, referring to them as vindictive and unfounded.

On the other hand, India’s Supreme Court revealed in January that the Adani Group will not be covered by any more probes than whats already being done by SEBI, a sigh of relief to the conglomerate. The Indian market regulator Sebi is investigating the Adani group for these two activities: tax haven use and some stock manipulation. The verdict implied no increase in the regulatory risk for Adani. The court also rejected the suggestions on changing the disclosure rules of offshore funds as suggested by Hindenburg.