Hindenburg Research is in the spotlight this morning after founder Nate Anderson announced plans for a shutdown, citing a personal desire to pursue work-life balance.
The investigative firm is broadly known for its report against Indian billionaire Gautam Adani and his conglomerate, the Adani Group.
“In-depth research on renowned names, including EV maker Nikola, fintech giant Block Inc., and the likes of Icahn Enterprises required intense focus that came at the cost of missing out on other aspects of life,” Anderson revealed in a statement today.
Adani stock is in the green on Thursday following news of the Hindenburg shutdown.
Why is Hindenburg Research shutting down?
Nate Anderson cited personal reasons, including a desire to spend more time with family and on hobbies for drawing the curtain on Hindenburg Research.
But it’s reasonable to expect financial or even legal struggles to have contributed somewhat to his decision to shut down the investigative firm.
After all, “short sellers hardly ever make sustained profits,” according to Ajay Bagga – a market veteran.
In a statement today, Bagga even went on to call Hindenburg a company that operated in the “grey zone”.
“Hindenburg Research was teetering between legality and ambiguity as it posted damaging reports on stocks in which it simultaneously had short positions as well,” he added.
Was Hindenburg involved in economic terrorism?
Other experts, including senior advocate Mahesh Jethmalani, made an even more brutal remark that questioned whether Nate Anderson and Hindenburg Research played a role in economic terrorism.
“Either he has already been sounded out by investigating authorities in the US, or he fears that he’ll be investigated for his role in the attempt to shake India’s economy by bare hammering of Adani shares. When you try to destabilize an economy, it’s economic terrorism.”
The Hindenburg’s report alleged corporate irregularities and stock manipulation, which resulted in a massive hit to Adani Group shares and tanked its market cap by more than $130 billion.
The stock, however, has since recovered.
Why do short sellers fail at making sustained profits?
Short sellers tend to fail at making sustained profits for several reasons.
For one, they have to borrow shares to sell them. This comes with borrowing costs that can eat into profits, especially if the trade takes a long time to play out.
Additionally, short selling often goes against the prevailing market sentiment.
If investors remain bullish, it can be challenging to find opportunities for profitable short positions.
Moreover, short selling can attract regulatory scrutiny and negative public perception as well.
Spreading negativity to drive down stock prices can be seen as unethical and can lead to legal consequences.
Finally, if a stock is heavily shorted, there’s also a risk of a possible short squeeze.
The post Here’s the real reason why Hindenburg Research is shutting down appeared first on Invezz
