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For the benefit of non-Hindi speakers, let me explain what "supari" means. In many Indian languages, the word "supari" refers to a contract for a hit or a job meant to slander, defame, humiliate, or harass a political or ideological rival. Now, let’s delve deeper into the massive Hindenburg exposé of claims and counterclaims, often made without facts or evidence.
Everybody wants to be rich, and they want it fast. In an age where everything is super-fast—from information to food—it’s hardly surprising that some companies have been exclusively formed to make a quick buck. Yes, I am talking about the Hindenburg story, about an organization created to make money out of thin air.
Here is the modus operandi: Hindenburg Research prepares an investigation report on a target company by going through its public records, internal corporate documents, and talking to its employees. The report is then circulated to Hindenburg's limited partners, who, together with Hindenburg, take a short position in the target company before publicly releasing the report. Hindenburg profits if the target company's share price declines. These reports also defend short-selling, explaining how it can "play a critical role in exposing fraud and protecting investors." This is what Hindenburg claims it does—a perfectly legal way to make money while earning the reputation of being a “holy cow.” The whole story has played out quite well for Hindenburg across the world, until now.
Let’s dive a little deeper. The organization spends millions of dollars investigating corporate fraud and misdeeds, then tries to cover any potential losses by shorting the stock. What this essentially means is that if nothing wrong is found, the money invested in the investigation is gone. The approach is fraught with risk, and the chances of success are precariously high. Before we delve into the details, I have a fundamental problem with the approach and the business model. The business model is based on a simple concept: "Find out who is committing corporate fraud and make money by exposing them and shorting their stocks." Every time you make money, millions lose it overnight, and you probably accelerate this loss by making the findings as sensational as possible. Essentially, it’s a “mini-run on the stock.”
When you examine the details, the whole method is riddled with too many "ifs" and "buts"—a whole lot of mess. Here’s what is fundamentally flawed about the approach:
How Do You Identify Who Is Wrong?
Who is your target? You don't have any reliable data to analyze this at the outset. Essentially, your plan is to target a large corporation and then identify the root cause of the issue. Let me be blunt—every large corporation will have skeletons in their closet, some big and some small. It’s like targeting a rich person, investigating their private life, and then claiming to have uncovered something dark. Every single soul on this planet has something that could be exposed. The richer and more powerful the individual, the higher the likelihood of finding such data. So, here is a company that has no true prospects—or should I say, they can make anyone their prospect and tarnish their reputation.
Hindenburg could more accurately be called an "Unhired Reputation-Damaging Consultant."
Questionable Investigative Methods
When they conduct these investigations, it’s unlikely they do it straightforwardly. There are bound to be moles, whistleblowers, and other unscrupulous tactics used to dig up dirt. This essentially means bending the rules and bribing the weak to leak that all is not well. It's like bribing a school to get admission, and then expecting that same school to teach morality to your children.
Hindenburg Discredited In US, Yet Given Unwanted Credibility In India: Harish Salve
Lack Of Accountability:
There’s no real accountability when it comes to the accuracy of their reports. These are investigative reports, and they come with 'disclaimers' stating that this is what they have found, and it is your duty to do your own due diligence and make an informed decision. But how can you make an informed decision when the stock crashes within minutes of the report’s release? The system does not protect investors if such damning reports are leaked online, causing mass panic and selling. It’s like a childhood tale where someone accuses you of stealing their pen, and now it’s up to you to prove you didn’t, while in the meantime, investors are bleeding profusely.
Hindenburg’s Second Hit And Run Attempt | NDTV Profit
Legal Protection For Hindenburg
What if the report later turns out to be false or half-baked? Nothing happens. The affected company can file a defamation suit, but Hindenburg is well protected because of their clear disclosures, including their short positions, and the fact that they do not advise anyone to take or withdraw positions based on their reports. So, they’re safeguarded by law because their lawyers have carefully crafted adequate disclosures to protect them from high claims. Even if a company sues for reputation damage, proving this in court is extremely difficult given the cross-country jurisdictions, the costs involved, and the time and effort it would take. In the end, it would be a futile effort.
Hindenburg-type organisations can now target not just companies but also entire countries, potentially pulling down their economies with reports of their choosing. Consider the recent accusation against SEBI (Securities and Exchange Board of India) and its chief, Madhabi Puri Buch, for which there was absolutely no proof. The whole report was filled with words like "we assume," "we think," "it may be," and so on. When such reports are released, the expectation is that they are backed by solid evidence that would stand up in court. This particular report didn’t even have an iota of it.
While all of this is happening, these organisations are well aware of the political situations in the countries they target, and they may very well be working in tandem with political beneficiaries. The latest report on SEBI chief Madhabi Buch was one such report that political opponents of the BJP tried hard to blow out of proportion. However, this time, it seems that the common investor in the Indian stock market didn’t buy into the plot, and Hindenburg might have to exit their positions sooner than they’d like. A failed “stock market coup” leads us to ask the following questions:
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If the stock market is supposed to protect investors, shouldn’t there be rules to bar such vulture firms?
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Can we not suspend trading in stocks if there is a belief that a massive threat is looming due to unverified reports?
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Should India view this as a concerted effort to destabilize the economy rather than an isolated threat to individual corporations?
Attacking the very institutions meant to protect investors sends the wrong signals to the average Indian, who may not understand concepts like shorting, longs, futures, and options. If India doesn’t wake up to this and doesn’t sue Hindenburg, it will embolden these firms to keep going. Vultures prey on the dead, and these companies kill and profit from the destruction they cause.
In my own Indian lingua franca, I would call them "Supari Hit and Run Traders."
Disclaimer: NDTV is a subsidiary of AMG Media Networks Ltd, an Adani Group Company.
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Kishore Subramanian is a leading financial consultant and the founder of Shree Mutual Fund Services Pvt., overseeing, protecting, and growing the wealth of over 5,000 families across India for the last three decades.
The views expressed here are those of the author, and do not necessarily represent the views of NDTV Profit or its editorial team.
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