Explainer: Does being a short-seller question the credibility of the report by Hindenburg

The latest report by the US-based short-seller Hindenburg Research has levelled serious allegations of conflict of interest against SEBI Chairperson Madhabi Buch and her husband, Dhaval Buch. This report comes nearly 18 months after Hindenburg’s previous allegations against the Adani Group for stock manipulation and accounting fraud.

Some experts have raised questions about the credibility of the latest report, noting that Hindenburg Research is a short-seller and is currently under investigation in India concerning its earlier report. Before going into the counter-allegations against Hindenburg, let’s first understand short-selling and who a short-seller is. Short-selling is a trading strategy where traders speculate on the decline in the price of a specific stock.

In this strategy, an investor sells stocks at the current market price without actually owning them and then buys them back later at a lower price to complete the trade. Traders who engage in short-selling are commonly known as short-sellers. They bet that a company’s stock will fall in value at a specific time. Following the Hindenburg report in January 2023, the Adani Group saw its market value decline by an estimated 150 billion dollars. Later, in January 2024, the Supreme Court directed SEBI to initiate a probe into short-selling activities as a result of the Hindenburg report.