Why has @HindenburgRes come up with the controversial Adani research report now?

How have they engineered their Big Short?

And how they have benefited from it?

Let’s find out in a short 🧵:

#AdaniGroup #stockmarketcrash #Adani #AdaniFPO
Hindenburg Research is a firm that looks for highly leveraged, absurdly valued companies that may undergo a price correction (or even a collapse) in the future.

They’re named after the Hindenburg airship, that went down in flames on 6 May, 1937.

#AdaniGroup #Adani
This time, they’ve set their eyes on Adani group of companies.

They’ve put out a detailed report on how the group is on its way to a spectacular collapse due to fraud and stock manipulation.

Not to mention absurd valuations and debt positions.

#Adani #AdaniEnterprises
They say that they’ve shorted the Adani stocks using US Bonds & non-India traded derivatives.

This means that they’ve probably put the bonds as collateral in an offshore OTC trade.

Since India doesn’t allow FIIs to short-sell onshore, the cost of this trade could be quite high.
Why?

Because whenever someone offers you an opportunity with a higher risk, the cost of that also comes with a premium.

This means Hindenburg was already bleeding cash/margin as Adani stock prices marched on higher.

Also, there’s an FPO in the works.

#Adani #AdaniFPO
The FPO is being offered at a higher price than CMP, thereby increasing the chances of prices shooting up higher in the longer run.

This would mean Hindenburg having to bring in more collateral, as margin requirements for the short would go up even higher.

#Adani #margincall
It’s quite natural for anyone holding a significant short position against Adani to come out with something to prevent the prices from going up further.

Otherwise they would get margin-called and will have to abandon the short at a huge loss.

So what does Hindenburg do?
They make public the information that they’ve so painstakingly acquired and collated, for two things:

1. Make public aware thereby creating awareness/panic

2. Bring prices down so margins required would be lower (which can be freed up for another opportunity)

#Adani #ADANIENT
Why else would you let everyone know about a great trade that stand to make you millions?

If everyone takes a short position in time, their profits are going to be diluted for sure.

So the timing of their research report makes perfect sense.

#Adani #AdaniEnterprises
On 27 Jan, Adani stocks lost almost $2B in value as markets fell.

LIC, with almost $10B of public money invested into Adani has been the biggest loser in this downturn.

It’s sure to have made Hindenburg very happy, & their strategy might just work if the correction persists.
However, what’s the truth behind their report?

It’s difficult to say.

It’s well-known that Adani stocks are highly leveraged and their PE ratios are absurdly high.

But the rest of it needs to be scrutinised by a competent authority that’s unbiased.

#stockmarketcrash
What’s your take on the controversy?

Comment below 👇🏼

If you liked this thread consider following The Money Memo and retweeting the first tweet 😊😊

We’ll be back with more insights and investment ideas!

themoneymemo.substack.com

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with The Money Memo

The Money Memo Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @themoneymemo

Dec 31, 2022
Mama Earth is a popular baby care & skin care company with organic products.

It recently announced its plans for an IPO, seeking a valuation of $3 billin.

There's just one problem.

Let's find out in a 🧵:

#mamaearth #StockMarket #ipoalert #investing Image
The company is backed by celebrity investors like Shilpa Shetty and the big names in the VC world : Sequoia Capital and Fireside Ventures Fund.

It was also valued at $1.2 billion in 2021 making it a unicorn.

Clearly, the company must be making millions in profits?

Not really.
Honasa Consumer Ltd, that owns Mama Earth posted a net profit of just INR 19.8 crore in FY21.

It had incurred a loss of INR 1332.2 crore in FY20.

But what is more interesting is an exceptional clause that was inserted into the shareholders' agreement in FY21. Source: Inc42
Read 7 tweets
Dec 28, 2022
The Rupee is in a free fall against the US Dollar.

However, the RBI is intervening to cushion INR's fall.

Ever wonder how the RBI does it?

Let's learn it here:

#USDINR #USD #forex #India #Rupee
First, let's understand why RBI intervenes to defend the rupee in the first place.

A weak currency worsens our fiscal deficit, fuels inflation and slows down international trade.

Clearly, RBI has a mandate to improve the situation on behalf of the GoI and the citizens of India.
Forex market is highly volatile and a breeding ground for speculators. This is why the FX market is the most liquid in the world with around $7.5 trillion (with a T!) in daily turnover.

So, RBI has to control speculation in the USDINR segment to ensure stability of the Rupee.
Read 11 tweets
Dec 26, 2022
The US Dollar stands at INR 82.82 as of today.

Ever wonder why the Rupee always depreciates against the Dollar?

Let’s find out in a 🧵:

#USD #Dollar #forex #investing Image
One of the major reasons for INR depreciation is India’s massive exposure and dependence on one single commodity:

OIL.

Almost 70% of our imports in value is just crude oil, as we’re the third-largest consumer globally.

There are two ways this affect our economy and currency.
1. Global crude oil market is denominated in USD.

This means we have to sell INR to buy USD in the Forex market first, and then pay the same to OPEC to import oil.

As demand for USD rises, and supply being controlled by The Fed, its value too rises against the INR.

#oilprices
Read 9 tweets
Dec 14, 2022
Net Cash Flow is an important metric many investors look at when researching companies.

But do you know that cash flows can be easily manipulated?

Let's see how:

#investing #finance #FinancialFreedom #Accounting
The Cash Flow Statement is one of the three most important financial statements of a company.

The other two being P&L Statement and the Balance Sheet.

Balance Sheet shows us the assets and liabilities of the company and is very important to look at when analyzing cash flows.
Cash position of a company has an inverse relation with Assets and a direct relation with Liabilities.

For e.g., you BURN cash to acquire an Asset. So when Assets increase, the cash position DECREASES.

On the corollary, an increase in Liabilities INCREASES the cash position.
Read 7 tweets
Dec 6, 2022
How Return on Equity (RoE) can be manipulated:

A short 🧵:

💰💰🔥🔥

#invest #Financial
First, let’s take the formula to calculate Return on Equity (RoE):

RoE = (Net Profit/Shareholders’ Equity) x 100

Here, we need to understand what shareholders’ equity stand for in the Balance Sheet:

#stocks #investing
If the company has assets worth ₹1000/- then liabilities also need to be ₹1000/-.

With no debt, in a simple world, the liability would be the shareholders’ equity. Let’s say Net profit is ₹100/-

And RoE would be :

(100/1000) x 100 = 10%

But everything changes with debt.
Read 6 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!

:(