Massive Fraud Claim Wipes Out $70 Billion of Indian Group’s Stock

The stock market value of India’s Adani Group has fallen massively in the past day after the conglomerate’s rebuttal of a US short seller claim failed to appease investors, deepening a market rout that has now resulted in over $70 billion in stock value losses for the group.

The Indian group, led by Asia’s richest man Gautam Adani, has clashed with US investment firm Hindenburg Research and on Sunday reacted to the short seller’s report from last week, which raised concerns about the Group’s brazen stock manipulation and accounting fraud scheme over the course of decades, international media reported on Monday.

According to the Bloomberg Billionaires Index, Gautam Adani’s net worth has since dropped by $30 billion. Until Monday, the tycoon’s fortune was estimated to be worth more than $92 billion or $10 billion more than fellow Indian entrepreneur Mukesh Ambani.

In its initial response after the report’s release, the Adani Group called the Hindenburg report “baseless” and “malicious,” and said Thursday that it was considering legal action. It responded on Sunday with a 400-page rebuttal where it claimed the US firm had an “ulterior motive.”

Soon after the rebuttal, on Monday, Adani Transmission, Adani Total Gas, Adani Green Energy, Adani Power, and Adani Wilmar all fell 5- 20 percent.

Adani Enterprises, which faces a key test this week with a follow-on share offering, swung between gains and losses before closing 4.8 percent higher. But it stayed well below the issue’s offer price, which if successful will be India’s largest such share offering ever.

Monday was a nightmare for Adani’s $2.5 billion secondary share sale when it ended amid weak investor sentiment. The stock closed 7 percent lower than the lower end of the offer price. Aljazeera first reported that Adani has just received bids for 1.4 million shares of the 45.5 million shares on offer. The deal closes on Tuesday (today).

Up until last week, Indian markets had been cheering for Gautam Adani and his frenzied pace of expansion prior to the stock crash, which continued on the Mumbai stock exchange on Monday. Investors were betting on the industrialist’s ability to expand his businesses in sectors targeted for development by Prime Minister Narendra Modi.

Today, trends suggest retail participation in Adani shares is likely to be low, with current market prices still dragging the offer price and sentiment suffering as a result of the Hindenburg scandal. While there is a risk that the share sale will not take place, it is critical to wait and see how institutional investors participate today.

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