Hindenburg Research's mission was to prepare investigative reports on targeted companies by examining their public records, internal company documents and interviewing employees. Each report was then distributed to Hindenburg's partners, who jointly took a short or "short-selling" position in the target company before publicly publishing the report. Short selling involves borrowing a share of stock to sell in the hope that the price will fall, then buying back the shares and pocketing the difference. Hindenburg made a profit if the target company's share price fell.
Hindenburg, founded in 2017, has a history of driving down the share prices of its targets by exposing fraud and other abuses in the financial markets that it has uncovered through extensive research. In one of his recent projects, he focused on the Indian conglomerate Adani Group, accusing it of "brazen stock market manipulation and accounting fraud". Hindenburg reported on two years of research, including interviews with former senior executives and the examination of thousands of documents.
Activist short selling, while lucrative, is a complex and risky practice, often shunned by large financial institutions. Smaller players usually partner with hedge funds to share the risks and rewards, while leading the whistleblowing campaign alone. Hindenburg Research, working with Kingdon Capital to carry out many of its market operations. However, this strategy can lead to legal complications. For example, Citron Research's Andrew Left has been charged with market manipulation and is awaiting trial.
Hindenburg's research has led to fraud charges and indictments against dozens of people, according to his website, but it has also resulted in costly legal battles. Hindenburg, despite a team of just 11, recently targeted Carvana, leading to fraud charges and costly legal disputes.
The financial detective behind the fund
Nathan Anderson isn't a name you frequently come across in the headlines, but in the world of finance, he's become more synonymous with integrity and insight. Originally from Connecticut, this son of a university professor and a nurse has forged a remarkable career path, which led him to found Hindenburg Research.
With a degree in International Business from the University of Connecticut, he went on to earn two prestigious professional certifications: Chartered Alternative Investment Analyst (CAIA) and Chartered Financial Analyst (CFA), attesting to his expertise in investment and financial analysis. His career began at FactSet Research Systems, where he provided financial software to professionals, before becoming an investment analyst for high-net-worth clients.
Despite a promising start, his first company, Clarity Spring Securities, was not as successful as he had hoped, a detail Anderson often fails to mention. The turning point came when he met Harry Markopolos, the financial investigator who played a key role in uncovering the Madoff affair. Inspired by this experience, Anderson decided to dedicate himself to the detection of financial fraud.
In 2014, Anderson began publishing whistleblower reports, hoping to earn government rewards for uncovering fraud. Called a "world-class digger" or a world-class investigator by Markopolos, he founded Hindenburg Research in 2017. The company's name echoes the Hindenburg airship tragedy of 1937, an avoidable disaster caused by the use of flammable hydrogen following an American helium embargo. For Anderson, the name symbolizes his mission: to prevent avoidable financial disasters.
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Hindenburg zeppelin on fire as it lands at Lakehurst, USA, 6 ai 1937 (Nationaal Archief)
The first successful attack
Hindenburg Research's first high-profile victim in 2020 was American manufacturer Nikola Corporation. Founded in 2014 by DraftKings, an online casino platform accused of embezzlement, or Roblox, a video game accused of hosting paedophile networks.
In a bold move, Hindenburg did not hesitate to be aggressive in its search for compromising information. In particular, the fund offered a $1 million bounty for any information on the reserves of the cryptocurrency Tether, suspected of not being fully pegged to the dollar as it claimed. This initiative was part of the firm's efforts to shed light on the true financial situation of Tether, which had already been sanctioned by the CFTC for misleading statements concerning its dollar reserves.
Among its victories, Hindenburg took a short position on Twitter (now X) in 2022 following the announcement of its acquisition by Adani, worth over $240 billion on the stock market. The report accused the group of decades of share manipulation and accounting fraud, including the use of shell companies in tax havens. The publication led to a massive fall in Adani's stock market value, with losses exceeding $70 billion. The Adani Group denied the accusations and published a defense document, but the impact on the company's reputation and finances was already significant.
However, some companies are more resilient than others. We have drawn up a table showing the fund's successes and failures.
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In a letter published on X late on Wednesday, Anderson said he was "writing this with joy", but that Hindenburg was a chapter in his life, "not a central element that (defines) him". He added that there was no particular reason why he had chosen to stop, but that the intensity and focus of his work had led him to miss people and experiences. The next step will be to provide open-source information on how Hindenburg carried out his investigations, he said.