Chances are strong you have not heard of Gautam Adani, the richest man in Asia. As a business ethics keynote speaker and business ethics consultant, entrepreneurs such as Adani fascinate me. I ask myself, “How did they get there? Are they ethical in their business dealings?” For, in my work, I seek ethical champions. I think most of us do. However, Adani is a mystery person, backed by a country who needs such champions and I have questions over whether the incredibly wealthy man is even in the ballpark of champion.
The Diamond Merchant
Adani, and most of his entire country are at war, so-to-speak, with New York short-seller company Hindenburg research. Adani and his country are crying foul, as his net worth has plummeted, but is he protesting too much?
Gautam Adani started his career as a college dropout. The native of Gujarat state traveled to Mumbai and began life as a small-time diamond trader. He quickly realized the future was in commodities trading. He was wildly successful in his financial pursuits and became a billionaire many times over. He knows the stock market; he understands how it works – and why, and that is the key.
Up until recently, the Indian financial system has been Adani’s biggest supporter and some would argue he has been uncomfortably close to Indian power brokers as he has close ties with Mr. Modi, the Indian Prime Minister. Adani, in fact, bought out an entire television network that was critical of Modi. Some would argue the move quelled opposition. Adani has performed many favors for Modi.
It is a red-flag of fraud when politicians become too close to influential business leaders. As a business ethics speaker and business ethics consultant, I have seen countless examples of this association in the states. The leaders develop close associations with politicians, funnel large sums of money into campaigns, in turn for favors.
Hindenburg Research
Hindenburg researches new stock offerings and will take positions as a short-seller, meaning that they anticipate a stock will go down for any number of reasons. As we all understand, the world’s financial fortunes are interconnected.
When Adani Enterprises recently put together a $2.5 billion stock sale, the financial world stood up and took notice. Here is where the worlds collide. On January 24, 2023, Hindenburg Research claimed Adani had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”
This immediately “set up a war.” Adani is accused of setting up fake companies and fictitiously trading stock back and forth. This immediately resulted in Adani’s people producing a 400+ page report essentially accusing Hindenburg of operating a “Madoff-type” operation. The government of India, protecting Adani has jumped into the fray and backed Adani’s contention that attacking the Adani Enterprises Group was like attacking India; that Hindenburg was reminiscent of India’s colonial rulers before independence.
After due-diligence, Hindenburg has stuck to its contention that Adani is a fraudster. The company has, according to Hindenburg, been unable to answer questions about its dealings.
“India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation. We also believe that fraud is fraud, even when it’s perpetrated by one of the wealthiest individuals in the world.”
The result
Whatever the choices of Adani, the consequences of alleged stock manipulation and fake trades, is that the Adani Enterprises Group has lost $107 billion in value with Adani personally losing nearly $49 billion. The public offering has been scrapped by nobly saying it wants to protect investors. I am not certain who they are truly attempting to protect.
To be clear, not everyone in India is an Adani believer. Said the head of India’s Profitmart Securities: “Unless Adani is able to regain the confidence of institutional investors, stocks will be in freefall.”
While Adani has pledged $70 billion to green energy, the words ring hollow especially in this age of ESG. While his companies are involved in mining, transportation, building, defense and numerous other activities, the bottom line is that once a fraudster is alleged of scams and stock manipulation it is difficult to back down from that image.
Confidence in a conglomerate or a person is lost when fraud is involved. So far, Adani has denied it and the international financial community no longer is buying into it.
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