The last part of the blog deals with the views and counter views as regards the latest Hindenburg charges against SEBI and its management. For this, let us remove the politics aside which needlessly confuses the issue and let's focus on the economic issues concerned and whether these fresh charges go on to establish culpability of the Adani establishment against the original charges itself.
The economic impact is the first and most important. Why did the Hindenburg report not have the (long-term) impact which other previous short-selling escapades of Hindenburg did in the US at least. Were the charges not material? Or were there enough positives for the market to shrug off these charges and still see value in the stock? Why and what is the motivation of this fresh salvo ?
To make sense of it, let's see Hindenburg for just what they claim to be. Short sellers, who make money by 'outing' the real story behind over-priced scrips. If so, they are playing a positive role in the dynamics of scrip pricing and influencing the right pricing of shares. As it happens, short selling is legal in USA, much like lobbying & even raising funds by selling seats at a presidential convention. Scrip manipulation to raise funds in a public issue is a crime. But the accusations were different. It was that by rigging prices, they obtained loans against the shares collateral for the group borrowings. But, as any banker could, lending is a more complex business where financial performance, its competitive edge, business viability is equally or more important than its share price.
That there is some truth in the charges of price rigging cannot be denied, though analysts also agree that there are enough grey areas for those seeking to push the boundaries without being overtly criminal. Now, analysts speak of the smell test, others are speaking about the 'Pinochet' test but that is for the market regulator, not Adani itself. Let's therefore stick to the original charges.
The reputation of SEBI & the Supreme Court is not above question & any discussion or investigation can only be positive. But just now, let's not change the focus. The original charge did not include collusion or inaction by the regulator. Whatever the finding, SEBI's connection with the price manipulation charge is tenous at best but at no level can it be linked to so called price rigging.
If indeed SEBI is guilty of compromising its standards, this is entirely another story. But targeting SEBI (it's chairperson in particular) smacks of post-facto justification of original accusations perhaps because the share market or the bankers or the financial system seemed to have managed to blunt these just by either ignoring it or not panicking or simply seen enough positives to stay unaffected. The lessons from the continuing episodes are as follows: (1) With greater financial integration cultural biases will creep in (2) Don't mix up political charges with economic wrong doing (3) Different economies have their own ways to manage crises (4) Merging of boundaries of between politics & commerce is unavoidable & (5) Financial misdemeanors should be fixed with penalties, hefty ones at that.
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