Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History (Hindenburg Research)

[matt4]

@mrmountaindew This is not new, and anyone sensible in Indian markets if they didnt believe Adani was a fraud enterprise is a terrible investor who let non-fundamentals distort their view. For insnance, many active funds including PPFAS have avoided any Adani stock, while these stocks have become part of many top 50/100 indices. If you look at Mutual fund holdings of Adani (https://www.rupeevest.com/Mutual-Fund-Holdings/112599) very few active funds have exposure, whereas a LOT of passive funds have exposure. This is really shocking and shows to the scale of corruption of Adani group that these scam stocks have become staple inclusions in many passive funds and indices.

That said, big props for Hindenburg to publish this. Indian research firms will never do so due to fear of government retribution, moreover there are all kind of short seller research which is banned by SEBI

I wonder how this trade is actionable for Hindenburg since none of Adani scam stocks are listed in the USA. And in Indian markets with short selling curbs and restrictions imposed by SEBI (staffed by rubber stamp government toeing executives) its not really an option that they can short Adani stocks in India and repatriate their profits back to USA

 

[yallow]

@matt4

I wonder how this trade is actionable for Hindenburg since none of Adani scam stocks are listed in the USA.

They mention positions on US bonds and Indian derivatives so I'm guessing they are short on Adani Ports dollar bonds and have bought puts on Adani stocks (or maybe even sold some calls for the lulz)

 

[matt4]

@yallow Yeah you are right, they mention

We hold short positions in Adani Group Companies through U.S.-traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities. This report relates solely to the valuation of securities traded outside of India. This report does not constitute a recommendation on securities. This report represents our opinion and investigative commentary and we encourage every reader to do their own due diligence

So they avoid any potential issues that could arise from SEBI repatriation curbs

 

[resjudicata]

@matt4 Sorry for this stupid question, what does shorting of stock/short position mean? Please eli5

 

[china13]

@resjudicata Shorting is basically selling a stock you don't have. You can do it by direct short selling. You borrow someone else's stock and sell it on the market. On a future date when stock price is lower you buy the same stock and return it to the original owner. You pocket the difference between selling price and buying price. Some of the profit goes to the original owner of the stock in terms of interest or fees. Of course broker takes its own share for facilitating the trade.

Another way of doing it via options. You can do all sorts of financial engineering using options to achieve the precise price point at which you may want to buy and sell.

 

[resjudicata]

@china13 Thank you. So, brokers like zerodha etc.lend people like me stocks? What if I am not able to pay them back at an agreed date?

The second part about options, is that options from fno's? Haven't touched that part yet, still learning about long term investing.

 

[resjudicata]

So, brokers like zerodha etc.lend people like me stocks? What if I am not able to pay them back at an agreed date?

Its all automatic, you don't have to worry about that. Chepaukpitch was just explaining the theoretical side of it. You borrow, you sell and you hope for the price to drop. Price drops. You go and buy the stocks back a cheaper price. Give the stock back to your broker and you keep the profit minus a tiny commission for borrowing it. If the price does not drop and appreciates, you'll still have to buy the shares back eventually but you'll be doing so at a higher price. You take the loss and return the shares back to the broker.

Yep the fno's. Options are of 2 types. Calls (CE) and Puts (PE). You can either buy or sell them. So you could have 4 different ways you could make or lose money on the same script. I recommend you check how they work. Its fairly simple.

Chepaukpitch also talks about manufacturing securities using derivatives. This is a slightly advanced topic but in essence you can create your own securities (say I want the pay off of a bond on a TATA script). I could manufacture that if the bond itself doesn't exit using the stock, calls and puts. These are called synthetic positions/securities. I'd be wasting my time if started explaining because in order for you to understand you need to understand what/how Calls and Puts are and how they work. I'll drop in a key word if you want further help in the future regarding synthetic positions. Its called the Put-Call Parity.

 

[resjudicata]

Thank you

 

[lepanto1571]

@resjudicata What should I do in order to be as knowledgeable as you are?

As I typed this I realise that maybe not possible since even if I follow what you say and manage to get the knowledge that you have now, by that time you would have managed to accumulate more knowledge so it's not entirely possibly humanely but yeah a start would be good!

Holyshit! Now when I type Knowledge it sounds a lot like $Money$.

 

[resjudicata]

@lepanto1571 Honestly I don't think I know enough. The world of finance and investments is vast. Its full of theories and formulas not constructed by finance professionals but mathematicians with Phds. People love to use jargon only they can understand and trying to understand all of them is a task and a half. Its honestly a waste of time.

I'd advice you to pick a role in finance and learn all about it, instead of trying to learn all of it. You'll never be able to it. So for example if consultancy attracts you, stick to consultancy. If risk management is more your thing, stick to that. If insurance, then insurance.

There are plenty courses, programs, videos on not just youtube but all over the internet. Many are free, some are paid. The key to tap into such resources is knowing what you want. You need to research and think long and hard towards what you want to do. The rest comes fairly easy.

If you don't know anything, Zerodha's Varsity is a good start.

 

[lepanto1571]

@resjudicata Thanks !