Two Wall Street Powerhouses Hit by the Fall of Billionaire Adani’s Empire

The two major U.S. institutional investors have exposure to the Adani Group conglomerate.

Indian billionaire Gautam Adani saw his net worth melt by tens of billions of dollars in a matter of days.

This disappearance of his fortune is happening at a speed comparable to his rise in the ghotta of the planet’s billionaires. 

Last September, Adani became by far the richest man in Asia and the second richest man in the world behind Elon Musk with a fortune estimated at $150 billion. 

This fortune is currently valued at $59 billion as of Feb. 4, according to Bloomberg Billionaires Index. It has melted a total of $91 billion in six months. But the real loss has been in the last 10 days. Since Jan. 24, Adani has seen his net worth plummet by $60 billion.

This rout is linked to the turmoil in which accusations of fraud made by the short seller Hindenburg Research have plunged the conglomerate founded by the tycoon. Hindenburg, on Jan. 24, said that it had shorted stocks of the Adani conglomerate through U.S.-traded bonds and non-Indian-traded derivative instruments. This means that the New York-based investment firm, a well-known short-seller, is betting on a short-term drop in the prices of these equities.

The short-seller claims that the conglomerate has used shell companies in tax havens to boost its revenue and manipulate the stock prices of its various entities. The report describes a galaxy of shell entities based in the Caribbean, Mauritius and the United Arab Emirates controlled by the Adani family.

“We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades,” Hindenburg wrote.

“Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities,” Hindenburg said.

Vanguard and BlackRock Are Shareholders

Adani Group has rejected the allegations as baseless and has threatened to pursue all possible legal remedies in Indian courts. 

“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” Adani Group said, in a 413-page report, on Jan. 29.

The accusations led to a sell-off of the entities that make up the Adani empire. The latter lost more than $110 billion of its market capitalization in less than 10 trading sessions. Adani Enterprises, the flagship company of this conglomerate, has lost more than 60% of its market value, or around $30 billion, since Jan. 24.

Adani’s wealth is essentially made up of his stakes in these companies. He owns  64% of Adani Enterprises, according to data firm FactSet.

But the Adani family is not alone in being impacted by the setbacks of its conglomerate. International investors are exposed to this rout like two gray institutional investors on Wall Street. These are the Vanguard Group and BlackRock.

Both firms are among the top 20 shareholders of Adani enterprises. Vanguard owns 0.75% of Adani Enterprises, according to FactSet data updated as of Feb. 3.

BlackRock is a shareholder of the company via two affiliates: BlackRock Fund Advisors which holds 0.57% and BlackRock Advisors (U.K.) Ltd is a shareholder with a 0.17% stake.

Neither Vanguard nor BlackRock have yet communicated on possible losses related to the stock market collapse of Adani Enterprises.

The two companies did not immediately respond to a request for comment.

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