Indian Energy Investor Recoups $20 Billion After Short Seller Attack
- In January, short-seller Hindenburg Research published a damning report alleging that Indian conglomerate Adani Group was involved in “brazen stock manipulation”.
- The report sent shares of the Adani Group companies crashing, with Adani losing two-thirds of his net-worth from $123B to $41.5B in the space of two months.
- Adani moved quickly enough to repair the damage and salvage his reputation.
The business world is a real rollercoaster where fortunes can be made or lost in an instant. But few events in the investing universe can be as devastating as being in the cross-hairs of a short-seller, as Indian billionaire Gautam Adani recently found out.
Back in January, short-seller Hindenburg Research published a damning report alleging that Indian conglomerate Adani Group was involved in “brazen stock manipulation” and “an accounting fraud scheme over the course of decades”.
According to Hindenburg, Gautam Adani, Founder and Chairman of the Adani Group, had managed to amass a net worth of roughly $120 billion, with $100 billion coming in the past 3 years, largely through stock price appreciation in the group’s seven key listed companies, which had spiked an average of 819% over the timeframe. Hindenburg argued that Adani Group’s seven key listed companies “…had 85% downside purely on a fundamental basis owing to sky-high valuations”.
The report sent shares of the Adani Group companies crashing, with Adani losing two-thirds of his net-worth from $123B to $41.5B in the space of two months. Adani also slipped from his #3 spot on the Bloomberg Billionaires Index to #21 currently. But all was not lost, even if the entire affair even prompted anti-government street protests. Adani moved quickly enough to repair the damage and salvage his reputation.
To allay investor concerns, Adani Group sold Rs 15,446 crore (~$1.9B) worth of shares in four of its companies to US-based equity fund GQG Partners. GQG Partners bought 55,600,000 shares of Adani Green Energy; 38,701,168 Adani Enterprises shares, 88,600,000 Adani Ports shares and 28,400,000 shares of Adani Transmission. To enhance its green credentials, Adani canceled a Rs 7,017 crore ($857.6 million) coal plant purchase, ditched plans to buy a stake in power trader PTC India and suspended work on a Rs 34,900 crore ($4.3B) petrochemical project in Gujarat.
Adani Group later revealed that it prepaid share-backed financing of Rs 7,374 crore ($901.2 million) to various Indian financial institutions and international banks. The company also held multiple roadshows in London, Dubai, Hong Kong and Singapore, among other locations.
Well, these moves appear to be working. Shares of the group's flagship Adani Enterprises have rocketed 127% from its 52-week low they hit on February 3; Adani Green Energy shares have rallied 86%, Adani Transmission is up 63%, Adani Total Gas has gained 37% while shares of Adani Power have gained 22% over the past 30 days alone.
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Gautam Adani is not complaining either, with his net worth up $20B over the timeframe, though he’s still $65B poorer than he was before Hindenberg hammered him and his companies.
Mixed Fortunes
Other energy investors have experienced mixed fortunes so far this year.
The world’s 5th richest person, Warren Buffett, cannot be considered an energy investor per se since his other investments dwarf what he has put into oil and gas stocks. Nevertheless, Buffet has seen his net worth decrease by $2.1B in the year-to-date to $105B. After a five-month hiatus, Buffett has resumed buying shares of Occidental Petroleum (NYSE:OXY). Earlier this month, Buffett's company spent $355 million on OXY stock in three days, raising its stake in the energy giant to 22.2%.
After emerging as the S&P 500’s best performer in 2022 with a nearly 120% gain, OXY is down 0.8% in the year-to-date.
Here’s a rundown of how fortunes of other global energy investors are faring in the current year.
#1. Mukesh Ambani
Country: India
Industry: Oil Refinery
Net Worth: $77.1B
YTD Change: -$10.1B
With a net worth of $77.1B Mukesh Ambani is the world’s 12th richest man and the richest energy investor.
Ambani controls India’s Reliance Industries (NSE:RELIANCE), the world's largest oil refining complex. The Mumbai-based conglomerate's other businesses include a 4G wireless network across India. Two years ago, Reliance Industries overtook ExxonMobil (NYSE:XOM) to become the world’s largest publicly traded energy company. However, an epic run by XOM last year saw it reclaim its position as top dog with a market cap of $430.7B.
RIL’s energy business accounts for ~80% of the company’s revenue. However, investors have chosen to focus on Chairman Mukesh Ambani’s plan to grow the company’s digital and retail arms. Reliance’s big bet in non-energy businesses such as telecom, retail, and digital services has helped it to vastly expand its revenue base.
#2. Low Tuck Kwong
Country: Indonesia
Industry: Coal/Port Operator
Net Worth: $26.6B
YTD Change: -$1.7B
Low is the 47th richest person and the founder of Bayan Resources, a coal producer and port operator in Indonesia. He is also the largest shareholder of Singapore-based renewable energy company, Metis Energy. In 2021, Bayan sold 40 million metric tons of coal and reported revenue of 40.8 trillion rupiah ($2.9 billion) in 2021. Low is also the largest shareholder of Metis Energy, a Singapore-based renewable energy company.
#3. Leonid Mikhelson
Country: Russia
Industry: Natural Gas
Net Worth: $26.2B
YTD Change: +$1.6B
Leonid Mikhelson is the 48th richest person and chief executive officer of Novatek, Russia’s largest non-state-owned natural gas provider. The billionaire owns about one quarter of the publicly traded company, which produces about 10% of the country's gas. He also holds a 36% stake in closely held petrochemical producer Sibur.
#4. Harold Hamm
Country: United States
Industry: Oil & Gas
Net Worth: $22.4B
YTD Change: +$25.0M
Harold Hamm is the 66th richest person and chairman of Continental Resources (NYSE:CLR), the biggest oil producer in the Bakken oil basin in North Dakota and Montana. Last year, shares of the Oklahoma City-based publicly traded company nearly tripled leading to a massive jump in Hamm’s net worth.
As of December 31, 2020, CLR’s proved reserves were 1,104 million barrels of crude oil equivalent (MMBoe) with proved developed reserves of 627 MMBoe. Last year, the company said in a press release that it would be folded into Ham-owned Omega Acquisition.
#5. Vagit Alekperov
Country: Russia
Industry: Oil & Gas
Net Worth: $18.4B
YTD Change: +$3.0B
Alekperov is the 89th richest person and chairman of Lukoil, the publicly traded producer of about 2% of the world's oil production. The Moscow-based company employs more than 100,000 people and had revenue of $125.1 billion in 2021. Alekperov collected more than $5 billion in dividends. He also co-owns the Spartak Moscow soccer team.
#6. Sarath Ratanavadi
Country: Thailand
Industry: Energy
Net Worth: $11.3B
YTD Change: -$301M
Ratanavadi is the 147th richest person, major shareholder and chief executive officer of Gulf Energy Development, a Thai energy producer. The Bangkok-based company operates gas-fired and solar electricity generation projects across the country and has more than 14,000 megawatts of capacity. Gulf Energy became publicly traded in 2017.
By Alex Kimani for Oilprice.com
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