Israeli Prime Minister Benjamin Netanyahu and Gautam Adani, January 31, 2023 [photo credit: @gautam_adani]
Adani denies all the accusations, issuing a 413 page statement 29
January claiming: "This (report) is rife with conflict of interest and
intended only to create a false market in securities to enable
Hindenburg, an admitted short seller, to book massive financial gain
through wrongful means at the cost of countless investors." Hindenburg
Research immediately fired back calling the Adani Group statement “a bloated response that ignores every key allegation that we raised.”
By that stage a rout of Adani Group was well and truly underway. In
the first few days of the release of the Hindenburg report, Adani lost
US$ 85 billion. By 10 February the losses had hit US$120 billion
with major investors taking fright. Among them was Norway’s US$1.3
trillion sovereign wealth fund which announced it was selling off its
Adani shares. Meanwhile the stock index compiler Morgan Stanley Capital
International (MSCI) raised the red flag on outflow concerns and
what is known as a free float: the proportion of shares that can be
purchased publicly by international investors. MSCI determined “that
the characteristics of certain investors have sufficient uncertainty
that they should no longer be designated as free float pursuant to our
methodology.” Cue more exits. By the week-end Gautam Adani had tumbled
down the list from 3rd richest to 17th richest man in the world.
Watching the bloodbath unfold will be two very interested Middle East
parties. The first is Tahnoon bin Zayed, the brother of the UAE
president Mohammed bin Zayed. The second is the Israeli prime minister
Benjamin Netanyahu.
As Matthew Hedges wrote in our 6 June newsletter
Tahnoon is the strategic architect who behind the scenes has built and
manages the vast business affairs of the Al Nahyan, Abu Dhabi’s ruling
family. He is a full brother to the president and Abu Dhabi ruler
Mohammed bin Zayed and one of six brothers who form the powerful Bani
Fatima bloc. Tahnoon, Hedges writes, “created the private conglomerate
Royal Group and more recently the Sovereign Wealth Fund ADQ. He is also
Chairman of the UAE’s largest lender, First Abu Dhabi Bank (FAB), as
well as International Holding Company (IHC) and Group 42 (G42).”
On 30 January as the storm continued to break over Gautam Adani’s
head, IHC made an extraordinary intervention in support of the Adani
Group, announcing it was backing the company’s US$2.5 billion follow-on
public offer (FPO) with a US$400 million commitment. According to Arabian Business
the decision was taken by Tahnoon “based on facts.” His CEO was quoted
stating “our interest in Adani Group is driven by our confidence and
belief in the fundamentals of Adani Enterprises Ltd; we see a strong
potential for growth from a long-term perspective and added value to our
shareholders.”
Two days later Adani Group pulled the FPO saying it did so to protect investors. Arabian Business reported that volte-face without mentioning the IHC investment, an example of how tightly domestic media is controlled in the UAE.
According to Gulf States Newsletter (subscriber access)
IHC is deeply invested in Adani Group. Last May it tipped US$2 billion
into Adani Green Energy, Adani Transmission and Adani Enterprises. The
share value of all three subsequently rose dramatically before an even
more dramatic collapse in the wake of the Hindenburg report. GSN
estimates IHC “may be sitting on losses of $770 million.”
Seemingly unruffled by his empire unravelling, Gautam Adani popped up
in Haifa to shake hands with Israeli Prime Minister Benjamin Netanyahu
on 31 January. The occasion was the sealing of a US$1.2 billion purchase
of Haifa Port by the Adani Group. Netanyahu hailed it as “an enormous
milestone” that will, according to the prime minister, encourage
connectivity between India and Israel, a concept he said he had
discussed at length with his “good friend” Narendra Modi. The Indian
prime minister is also, it appears, a good friend of Gautam Adani: his
administration, as noted by Hindenburg, has stepped in on several
occasions to halt investigations into the Adani Group’s financial
activities.
In addition to boosting trade links with India, the port purchase has been projected as the starting point for an ambitious undertaking
to link the Gulf states to Israel and the Mediterranean via a rail
line. Such a project though long mooted has several obstacles to
overcome, not least the current tension between Jordan and Israel (the
line would run through Jordan into Saudi Arabia then on to Medina and
across the kingdom to Dammam on the Persian Gulf.)
That did not deter Gautam Adani from tweeting
“The Abraham Accord (sic) will be a game changer for the Mediterranean
sea logistics. Adani Gadot set to transform Haifa Port into a landmark
for all to admire.”
Indeed the railway, were it ever to be built, would hugely assist in
drawing Saudi Arabia into the Abraham Accords, joining two other Gulf
states, the UAE and Bahrain, in Israel’s circle of Arab friends and
allies. That would be a huge coup for Netanyahu. But with the Adani
brand, like the original Hindenburg, seemingly going down in flames
there will be nervous moments in Abu Dhabi and Tel Aviv.