The encyclopedia · Trading & Investing · Financial decision · 2023
Adani pulled its $2.5B share sale after $86B vanished in a week
Hindenburg's Jan 24, 2023 report erased about $86B from the Adani group. On Feb 1, with its flagship stock down ~30%, Adani cancelled its $2.5B sale.
Adani Enterprises · 2023-02-01
What happened
On 24 January 2023, US short-seller Hindenburg Research published a report accusing India's Adani Group of 'a brazen stock manipulation and accounting fraud scheme over the course of decades'. The group denied the allegations and pressed on with the $2.5 billion follow-on share sale of its flagship, Adani Enterprises. The market answered: within a week roughly $86 billion of group market value had been wiped out, and on 1 February the Adani Enterprises share crashed nearly 30%.
That evening, after 10 p.m. local time, the company pulled the offer. The board said that in the face of unprecedented market volatility and extraordinary circumstances, proceeding would be 'not morally correct', and Adani Enterprises began working with its bankers to refund investors who had committed to buying the new shares. Gautam Adani slipped out of the top ten of Forbes' real-time billionaire ranking, and the Securities and Exchange Board of India was investigating the allegations and potential irregularities in the share sale itself.
The arithmetic of the week: a $2.5 billion raise abandoned against roughly $86 billion of market value lost — the group gave up more than thirty times the capital it had been asking for, and the sale's cancellation locked in both losses on the same day.
Why it happened
- Proceeding with a share sale in the week after fraud allegations meant the raise itself became the referendum on the allegations.
- The stock collapse moved faster than any rebuttal: ~$86 billion of value gone in a week made the $2.5 billion raise irrelevant to the balance sheet's real problem.
- Cancellation and refunds preserved optionality but confirmed the rout — the group lost the capital, the value, and the narrative in a single evening.
The lesson
When allegations land mid-raise, the raise becomes the referendum. Adani lost more market value in a week than thirty times the capital it chose not to take.
Sources
- CNN — Adani scraps $2.5 billion share sale as value of his empire collapses, 1 Feb 2023
- Semafor — India's Adani Group calls off $2.5 billion share sale after Hindenburg report fallout, 1 Feb 2023
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