Adani Enterprises FPO Gets Lukewarm Response On First Day Amid Allegations By Hindenburg

Adani Enterprises’ follow-on public offer (FPO) got a lukewarm response from investors on first day of the issue amid allegations levelled by US-based short seller Hindenburg Research. The Rs 20,000 crore Adani Enterprises FPO, which is the country’s biggest FPO yet, was subscribed just 1 per cent at the end of day one of the issue, data from stock exchanges showed. 

The investor response was muted as the price of the stock fell below the FPO price band in stock market following a massive selling spree after US-based Hindenburg Research accused Adani Group of fraud and market manipulation. Adani Enterprises stock fell 19 per cent to Rs 2,762 on the BSE today. This is far below than the FPO lower price band of Rs 3,112-3,276. 

Market expert Vijay Chopra of Enoch Ventures is of the opinion that investors should avoid subscribing to Adani Enterprises FPO citing its expensive valuations. 

“Investors should look for value rather than valuations and avoid subscribing to the FPO,” he said. 

Short selling is not shareholder activism and such campaigns could be disruptive for management and companies, corporate governance firm InGovern said. 

“Short sellers are not held in high regard in global capital markets and even in the USA, many short sellers, including Hindenburg, are under investigations by the SEC (Securities and Exchange Commission) and DoJ (Department of Justice), as the short sellers are thought to achieve their objectives at all costs and detrimental to the interests of other investors,” InGovern said. 

The US-based short seller Hindenburg Research revealed in its report, which was prepared over a period of two years, that Adani Group had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.” 

The report came couple of days ahead of the Rs 20,000 crore follow-on share sale of Adani Enterprises opened for investors.  All the listed stocks of the group took a beating after the report. 

Adani Group questioned the timing of the report, saying its publication ahead of the FPO “clearly betrays a brazen, mala fide intention to undermine Adani Group’s reputation with the principal objective of damaging” the issue. 

The US researcher’s report had alleged that, “Gautam Adani, founder and chairman of Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group’s seven key listed companies, which have spiked an average of 819 per cent in that period.”  

The Hindenburg report detailed a web of Adani-family controlled offshore shell entities in tax havens spanning the Caribbean and Mauritius to the United Arab Emirates, which it claims were used to facilitate corruption, money laundering and taxpayer theft, while siphoning off money from the group’s listed companies. 

“Our research involved speaking with dozens of individuals, including former senior executives of Adani Group, reviewing thousands of documents, and conducting diligence site visits in almost half a dozen countries,” it said.  Hindenburg claimed to have uncovered “rudimentary efforts seemingly designed to mask the nature of some of the shell entities.” 

Meanwhile, Adani Enterprises on Wednesday said it has raised Rs 5,985 crore from anchor investors ahead of its follow-on public offering. 

The company allotted a total of 1,82,68,925 equity shares to 33 funds at Rs 3,276 apiece, taking the transaction size to Rs 5,985 crore, according to a circular uploaded on the BSE website. 

Foreign investors who have been allocated shares include Abu Dhabi Investment Authority, BNP Paribas Arbitrage, Societe Generale, Goldman Sachs Investment (Mauritius) Ltd, Morgan Stanley Asia (Singapore) Pte, Nomura Singapore Ltd and Citigroup Global Markets Mauritius. 

A slew of domestic institutional investors, including LIC, SBI Life Insurance Company, HDFC Life Insurance Company and State Bank Of India Employees Pension Fund, also participated in the anchor book.