Hindenburg vs Adani: investors will pick sides

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In today’s newsletter:

Adani Group’s share sale tests alliances

Nothing says everything’s fine like a 413-page rebuttal of allegations of fraud made by a short seller — the vast majority of which is filled with annex materials that don’t directly address the claims.

But Gautam Adani, Asia’s richest man whose sprawling business empire stands accused by Hindenburg Research of “pulling the largest con in corporate history”, must try to convince investors otherwise as his company presses on with a $2.5bn share offering.

The sale, initially intended to help Adani Group court international backers, will now act as a crucial litmus test of the self-made tycoon’s odds of weathering the storm.

DD readers are well acquainted with Hindenburg, Nathan Anderson’s small New York-based firm that has become synonymous with blistering attacks against speculative companies such as Nikola and Lordstown Motors.

Hindenburg has taken aim at Adani’s debt-fuelled growth model and shaved more than $50bn from the value of its listed companies by the end of trading on Friday.

Adani called the report a “malicious combination of selective misinformation and stale, baseless and discredited allegations”, which it said are intended to undermine the Adani Group’s reputation and damage demand for the share sale.

Bill Ackman drew comparisons between Adani’s initial response and Herbalife, the nutritional supplements group his Pershing Square placed a $1bn bet against in 2013.

Adani’s response to @HindenburgRes is the same as @Herbalife’s response to our original 350-page presentation. Herbalife remains a pyramid scheme. I found the Hindenburg report highly credible and extremely well researched. @AdaniOnline response speaks volumes. Caveat emptor. https://t.co/og6DLbPzp5

— Bill Ackman (@BillAckman) January 27, 2023

Ackman battled with Herbalife for years, but Adani’s share issue may drive quick clarity. Allegiances soon will be revealed as investors decide whether to participate.

Abu Dhabi’s International Holding Company provided a much-needed boost to Adani on Monday when it revealed plans to invest $400mn in the sale.

IHC is a powerful backer with close ties to the ruling family of the United Arab Emirates, the FT reported earlier this year.

More telling will be whether others subscribe. Singapore’s Maybank and the Abu Dhabi Investment Authority are among institutions that have been allocated shares in the sale, as are London-listed Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs.

Adani had also hoped to receive significant support from Indian retail investors. On that front, early signs aren’t looking good.

“We’ve had no demand at all. Usually we see some demand, but there’s nothing so far,” said Rajat Sharma, founder of retail brokerage Sana Securities in Delhi. “Right now it’s ‘nothing’ numbers.”

Adani shut down reports that it was preparing to cut the offering price over the weekend.

It has sought to frame the battle on nationalistic grounds, calling the report “a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India”.

Such a statement may be directed at the country’s highest rungs of power.

Adani has had a longstanding association with Prime Minister Narendra Modi, a relationship subjected to fierce scrutiny from critics. They accuse Adani of using its ties to secure sweetheart deals in privatising critical infrastructure, such as airports.

It also remains unclear how deep international hedge fund scrutiny of Adani runs.

Ackman wasn’t the only prominent US investor to weigh in. His Herbalife foe, Daniel Loeb, of Third Point, retweeted Hindenberg’s initial report.

Adani has strongly refuted the allegations of fraud made in the report, stating that it complied with all laws and made all necessary regulatory disclosures. The company has said it’s weighing “remedial and punitive action” against Hindenburg.

Renault saves its alliance with Nissan — for a price

In the newly forged overhaul of Renault and Nissan’s fraught alliance, the French carmaker can’t exactly claim a triumphant victory.

Once the partner with the upper hand and a 43 per cent stake in Nissan, Renault has agreed to whittle that down to 15 per cent over time, with little in return. This is a huge change following the downfall of former boss-turned-fugitive Carlos Ghosn, who tried to combine the two companies under one roof.

Recent discussions were rife with suspicion and setbacks at every turn, people close to the talks told the FT.

Yet if the deal has been greeted with relief and a glimmer of optimism by Renault executives, it’s a measure of how truly disastrous relations had become in the course of the 24-year alliance.

The companies were stumbling from impasse to impasse on most of their joint projects, in a stand-off that only worsened with the 2018 arrest of Ghosn, who reigned over the alliance and kept it stitched together. (The former chief is now in his native Lebanon, which doesn’t extradite its citizens.)

People close to both sides in the restructuring discussions have said that the rebalancing at least had the merit of potentially generating the goodwill to now take these projects forward. Renault will get Nissan’s support for some of its own initiatives, like a spin-off of its electric car business Ampere, as Lex notes.

That the French state in particular, a 15 per cent shareholder in Renault, would welcome such an outcome is also a tacit acknowledgment that its previous hardball tactics with Nissan haven’t worked.

“Anything is better than the status quo”, is now the refrain around the restructuring.

Assuming Renault and Nissan finally get the deal over the line — board approvals are still pending — the companies will now have to prove that’s true.

At 888, the house might not always win

Eight is a lucky number if you believe Chinese proverbs. But at UK betting company 888, good fortune seems to be in short supply.

Shares in the group plunged 27 per cent on Monday, erasing about £125mn in market value, after 888 announced it had suspended up to £50mn worth of VIP accounts in the Middle East over concerns they were in contravention of anti-money laundering rules and ejected its chief executive Itai Pazner.

Jonathan Mendelsohn, 888’s chair and a lobbyist-turned-Labour peer, is in charge until a replacement can be found. 888’s finance chief Yariv Dafna, who was meant to leave the business in March, will stay until year-end, the company said in a bid to reassure investors.

Whoever takes over as boss will have quite the task on their hands: the company took on oodles of debt to fund its £1.95bn acquisition of William Hill’s non-US business last year and has promised to slash its debt pile from nearly six times ebitda to three and a half times within two years.

Pazner, who worked at the company for two decades, has been under pressure to turn things around ever since the William Hill acquisition soured due to a sharp uptick in interest rates, according to two people at the company. The money laundering failures could be a convenient excuse to give him the boot.

“I honestly think [888] must be the most horrible place to be in the industry at the moment,” one insider told the FT’s Oliver Barnes. “I just don’t know who can salvage this,” added a former executive.

Job moves 

• Unilever has named Hein Schumacher, the head of a Dutch dairy co-operative Royal FrieslandCampina, to succeed Alan Jope as chief executive.

• Legal & General chief Nigel Wilson is retiring after more than a decade at the helm of the UK’s largest life insurer and investment manager.

• Salesforce has appointed three new directors to its board in an effort to fend off criticism from activist investors, people familiar with the matter told DD.

• American International Group has terminated Mark Lyons as its interim chief financial officer, global chief actuary and head of portfolio management after he “violated his confidentiality obligations”.

• Shell’s director of strategy, sustainability and corporate relations Ed Daniels will depart after more than 34 years at the company as part of a broader shake-up.

• Arrival has named Igor Torgov, a former Microsoft executive who has worked at the UK electric-van start-up for two years, as chief executive amid plans to shed about half its remaining workforce to prevent it running out of cash this year.

• Kering has named Italian designer Sabato de Sarno as the new creative director of Gucci.

• Citigroup has named Cyril Besseddik as head of healthcare investment banking for Europe, the Middle East and Africa, based in London. He joins from JPMorgan Chase.

• Morgan Stanley‘s regional head for the Middle East and north Africa Sammy Kayello is stepping down, per Reuters, though he will remain on as a senior adviser.

Smart reads 

Eviction notice Blackstone is ramping up tenant evictions at its properties across the US, DD’s Mark Vandevelde reports. Execs say winding down coronavirus pandemic-era forbearance will boost returns at the firm’s redemption-hit real estate fund.

Stuck in the past Barclays’ big reshuffling seems trivial compared with more pressing problems, writes the FT’s Patrick Jenkins, as its outdated business model threatens to undermine progress at the top.

Always the target, never the takeover Bestway billionaire Anwar Pervez could finally be the one to pull the trigger on UK grocer Sainsbury’s, the Sunday Times reports.

News round-up 

EY came close to uncovering Wirecard fraud in 2016 (FT)

Perella Weinberg suspends London-based banker after insider trading probe (FT)

LVMH, L’Oréal among suitors for stake in Aesop (Bloomberg)

Premier League backs Sorare’s NFT fantasy football game despite crypto crash (FT)

Brookfield in talks on deal for DWS’s private equity secondaries unit (Bloomberg)

French banks set to lose out on rising rates due to loan repricing rules (FT)

OpenAI bolsters ties to other AI start-ups with venture investments (The Information)