Is Gautam Adani Going To Be The Next Elon Musk, Who Lost $200 Billion From His Own Share?

Is Gautam Adani Going To Go The Next Elon Musk, Who Lost $200 Billion From His Own Share?

As you already know, business tycoon and Tesla CEO Elon Musk is the first person in history to lose $200 billion from his net worth. Due to a drop in the value of Tesla’s shares, Musk’s wealth went from a high of $340 billion in November 2021 to a low of $137 billion a few months later. Just like Elon Musk’s net worth shrunk dramatically in history, Is Gautam Adani going to be the next Elon Musk as Adani lost half of his wealth in a flash?

Just a few weeks ago, Gautam Adani held the position of the fourth richest person in the world. The Indian industrialist who created his fortune on his own was worth an estimated $120 billion, making him richer than Bill Gates and Warren Buffett combined. Then, an American short seller named Hindenburg Research that had bets on Adani’s enterprises said that he had perpetrated “the greatest scam in corporate history.”

Since then, the value of Adani’s companies has dropped by $110 billion, and his personal wealth has decreased by half to a little over $61 billion as investors withdrew their support. The Adani Group may have called the research “baseless” and “malicious,” but investors are still wondering about the validity of its assertions. Banks and other business associates of Adani are coming clean about their relationships with the company.

Stock manipulation, illegal use of tax havens, money laundering, and excessive debt were all among the charges levelled by Hindenburg against the firm. Since Hindenburg made allegations of market manipulation, unlawful use of tax havens, money laundering, and increasing indebtedness against the Adani Group, the company’s value has dropped by $118 billion, or 50%, in just 10 days.

Hindenburg has a proven track record.

Known as an outspoken short seller on Wall Street, Hindenburg was named after the infamous doomed airship. This company actively seeks out and exposes the fraud and other misconduct in the public markets while turning a profit. A reduction in the share price of the target, which is usually a publicly traded firm, results in a financial gain for the organisation.

Some have argued that activist short sellers are irresponsible because they take risks by betting against companies. The shorts argue that their actions help maintain order in the market. With barely a few years under its belt, Hindenburg has already taken down 30 businesses, including electric vehicle pioneer Nikola.

One of its most well-known reports, from 2020, was on the electric vehicle startup Nikola, whose CEO, according to Hindenburg, had made false statements in order to secure investments from major automakers eager to catch up to Elon Musk’s Tesla. Trevor Milton, the company’s founder, was found guilty of defrauding investors. According to its website, Hindenburg has raised concerns about suspected malfeasance in at least 16 organizations since 2017.

What do investors think?

In light of these assertions, investors are fleeing the market, not wanting to risk being on the losing end of a deal. Since the publication of Hindenburg’s analysis on January 24, shares of Adani Enterprises, Adani’s flagship company, have fallen by roughly 55%. Due to this, the company is currently having trouble securing additional finance. Adani Enterprises abruptly pulled out of a $2.5 billion share sale agreement on Wednesday, only 24 hours after it was finalised.

On Friday, the majority of the Adani Group’s stock prices fell once more. When shares of five Adani companies fell by more than the daily restrictions of 5% and 10%, the Indian stock markets suspended trade in those companies. Adani’s primary business partner, TotalEnergies, has said that the company will allow one of the “big four” accounting firms to conduct a “general audit.” Adani has yet to provide any sort of confirmation.

The French energy behemoth said that its exposure to Adani, through joint projects in India, was “minimal,” despite the fact that it totalled $3.1 billion. In addition, the document stated that the collaborations “were performed in full conformity with applicable — particularly Indian — legislation.”

Although the overvaluation of Adani shares was not unexpected, the claims of fraud and market manipulation are shocking in their severity. Similar rumours surfaced on social media last year, but the authorities never responded, and the issue eventually faded away. Hindenburg’s exhaustive research is a breakthrough that will benefit the Indian market by resolving uncertainty about the Adani companies’ corporate governance.

So, what happens next?

The recent sales flurry raises concerns about Adani’s companies’ ability to continue covering their expenses in the future. Hindenburg has voiced concern about the substantial debt held by Adani companies, and this issue is being closely examined. Moody’s Investors Service predicted that the group’s capacity to raise money would be hindered by the current uncertainty and made this prediction public on Friday.

Adani issued a statement late Wednesday night reassuring investors that his company is in good standing and promising that management would evaluate its capital market strategy “after the market stabilises.” He reassured the audience that the company has a “very healthy balance sheet” because of consistent and reliable cash flow, a solid asset base, and a history of timely debt service payments.

Adani isn’t the only company that could feel the effects of the sell-off. If the valuation of Adani Group holdings continues to plummet, it is possible that Indian banks that retain those shares could also be impacted. In the next few days, the controversial businessman could face additional losses if the bloodbath occurring with his company’s shares is not stopped.

India Inc. is on the defensive

Meanwhile, the incident has contributed to rising political unrest in New Delhi. Several opposition members of India’s parliament have called for an investigation of the Hindenburg report. On Wednesday, they protested inside the nation’s parliament as the finance minister delivered the budget for the year.

Due to the ruckus caused by their demands that regular business is suspended on Friday to allow an urgent discussion of the Adani problem, both houses of parliament were adjourned until Monday. “Adani is getting in trouble all over the world, but PM Modi is keeping quiet,” tweeted the main opposition party, Congress. When is our government going to act?

In recent years, Prime Minister Narendra Modi has counted Adani as a personal ally. Gautam Adani, a friend of Prime Minister Modi’s, is allegedly involved in the largest swindle in human history. However, the Prime Minister remains mute. Not only has there been no inquiry, but also no measures have been taken.

India Inc., which only a few short weeks ago was out in force at the World Economic Forum in Davos, Switzerland, pitching chances for international investors, is currently facing uncertainty due to concerns over the state of Adani’s empire.

The representatives of the country relied heavily on the country’s bright economic future. Last month, the World Bank predicted that of all the major economies this year, India would experience the strongest economic growth.

Manish Chowdhury, head of research at brokerage Stoxbox, declared that the Adani controversy had “opened a huge can of worms.” He continued by saying that “The India story is appearing weak” to investors from other countries.

edited and proofread by nikita sharma