The U.S. stock market is off to the races again, encouraged by hints that interest rates may peak soon, and that the economy continues to grow.
But under the radar, there’s a crash. It’s in Adani Group, which you can trade over the counter under the symbol ANNRY.
A week ago, Adani was worth over $200 billion. Today it’s fighting to hold $100 billion. CEO Gautam Adani has seen his own fortune fall to $75 billion.
This tells you something. Adani is closely held.
The stocks crashed after a report from short seller Hindenburg Group charged that they were being held up by a network of offshore companies and a very thin float. What made Hindenburg suspicious was that the value of the companies rose over 800% in just a few years, on assets like coal mines, container ports, and airports. It didn’t make sense.
But there’s another lesson here, America’s dominance of the global marketplace. About 40% of the world’s stock market value is now held in the two U.S. markets – the New York Stock Exchange and the NASDAQ. About 60% of the world’s liquidity, the capital companies require to do business, is in the U.S. That’s why the threat to cut off Chinese stocks from U.S. exchanges was so powerful. It’s why the Hindenburg report blew such a big hole in Adani’s market battleship.
Adani didn’t help himself. His initial response was to wrap himself in the Indian flag. This just made traders more suspicious. Throwing paper at the problem, a 413 page rebuttal that was mostly charts and word salad, didn’t help either.
Adani is highly leveraged. That is, it has borrowed a lot of money on its assets and its equity. This made it more vulnerable, especially after banks stopped taking Adani bonds as collateral for loans. Adani scrapped a sale of more debt but that debt was a small drop in a big bucket.
There’s one more point, and it’s about the field I work in. The Hindenburg report took two years to research and write. It’s basically journalism. It’s clearly written, its points are rigorously backed by data, it “has the receipts” as reporters say.
Hindenburg also has a business model. It knows how to make money from its work. Any publisher who can find a business model can prosper. What the industry lacks is imagination, not talent, and certainly not demand for what we do.
