The Washington PostDemocracy Dies in Darkness

This trader bets against companies. Now he’s targeting one of the biggest.

Nate Anderson’s Hindenburg Research has levied fraud accusations against a conglomerate led by one of the world’s richest people

Nathan Anderson in New York this month. (Bonnie Jo Mount/The Washington Post)
5 min

Five years ago, Nate Anderson was a relative nobody living in a small Manhattan apartment he could barely afford. But he had an unusual talent: sniffing out corporate fraud, which this week landed him in a showdown with one of the world’s richest men.

Anderson made waves this week when his firm, Hindenburg Research, announced that it was betting against financial instruments linked to the Adani Group — an Indian energy and infrastructure conglomerate headed by Gautam Adani, a man whose estimated net worth at the start of this year exceeded that of Jeff Bezos, Bill Gates and Warren Buffett.

Hindenburg published a report that accused the Adani Group of, among other things, artificially boosting the share prices of its firms over several decades by using a network of overseas shell companies linked to Adani’s family members. Hindenburg argued that Adani’s companies were collectively overvalued on India’s stock market by more than 80 percent.

The allegations leveled by Hindenburg hit the Adani Group’s stocks hard. By the week’s end, some shares had lost 20 percent, and the companies’ collective market value had lost $51 billion, as the Adani Group denied the allegations and threatened Hindenburg with legal action.

Business empire of Asia’s richest man hit by sell-off after fraud report

Hindenburg said it stood by its report and “would welcome” litigation.

The talk might seem tough for a relatively small five-year-old research and trading firm, but Hindenburg’s rise has been meteoric under the leadership of Anderson, a Connecticut native who experts and peers say has a gift for a type of stock trading known as short selling.

“This is a razor’s-edge type of business,” said Carson Block, a prominent short seller. “And Nate, to date, has been very good at it.”

Short sellers bet against stocks or other assets using various financial maneuvers. While some short sellers simply place bets on the decline of a company’s stock, others — “activist short sellers” — release research about a company’s weaknesses, such as alleged wrongdoing, hoping to persuade the market to sell shares.

Some corporate executives see activist short sellers as unsavory actors trying to profit by destroying companies. But others say they can play an important role as actors driven by high financial rewards to expose corporate fraud.

“I think that short activism is a tool. And it can be used in a good way, or it can be used in a bad way,” said Gabriel Grego, the founder of Quintessential Capital Management and a short seller who has worked with Anderson. “Just like a knife can be used to stab somebody or it can be used to perform lifesaving surgery, it depends on how you use it.”

Anderson grew up in Connecticut, Bloomberg News reported, and from a young age, he’s had a penchant for asking big questions. In an episode for the Wall Street Journal podcast “Bad Bets,” he said that as a child, he tried to convince a rabbi at his Orthodox Jewish school that the biblical Book of Genesis was incompatible with the theory of evolution.

He earned a business degree from the University of Connecticut and worked at an investment firm before going into short selling full-time for himself, Bloomberg News reported. He told the Wall Street Journal in 2020 that he remained “broke” not long after starting Hindenburg in 2017.

But he stuck with short selling, publishing a number of reports that alleged corporate malfeasance.

Grego told The Washington Post that he worked with Anderson in 2018 to investigate a cannabis firm and produce a report on the company’s acquisitions. Grego called Anderson “an extremely intelligent person” with a “great sense of humor.”

They became friends after meeting at a conference and collaborated twice, pairing Anderson’s public document skills with Grego’s preference for field work.

“I think he has a nose for this kind of fraud,” Grego said. “He’s incredibly productive; he works very, very, very, very fast.”

Anderson and Hindenburg struck it big in 2020, with a report on the electric vehicle maker Nikola, alleging that the company misrepresented its technology. The report cratered the company’s stock price, and investigations from the Justice Department and securities regulators followed. Nikola’s founder was later convicted on fraud charges.

The Nikola trade launched Anderson from obscurity to a serious player. “It’s just like a rocket ship that he got on all of a sudden,” Block said.

But taking on the Adani Group is a far more ambitious task. Critics say its success is largely owed to its founder’s ties with Indian Prime Minister Narendra Modi, and the company’s business interests have closely aligned with the government’s policy goals. The Post reported this week that Modi’s government has taken steps to aid the business, which receives a majority of its revenue from power generation, shipping, mining and electricity transmission operations related to coal.

Who is Gautam Adani? Asia’s richest man is rocked by fraud claims.

Besides facing the threat of possible litigation, short sellers generally should be cautious when taking on powerful entities, Block said.

“I assume that India is off his list of places he’d want to go,” Block said.