The money man behind Hindenburg’s Adani trade

One sizzling scoop to start: Steak restaurant group Hawksmoor has been put up for sale in a deal that could value the chain at about £100mn, according to two people familiar with the matter, as it seeks to grow its international footprint.

And the rekindling of a merger: Paramount has resumed merger talks with independent production studio Skydance Media just weeks after an earlier deal fell apart at the last minute, people briefed about the matter said. The renewed bid includes a higher offer to get the deal done.

In today’s newsletter:

• Hindenburg comes under attack in India

• Wall Street’s China dreams unravel

• A UK fund that got too close to the Kremlin

The silent partner to the trade that rocked Adani

When Nathan Anderson of Hindenburg Research unveiled a detailed bet against Gautam Adani’s group of companies in January 2023, the feared short seller conceded he likely wouldn’t make a massive profit off an investment that rocked the empire of one of India’s richest men. 

On Monday, Anderson laid out the relatively paltry windfall from his bet against Adani Group, stating he’d earned just over $4mn for his bets against the parent company.

The gain is small when compared with the impact of Hindenburg’s report, which accused the conglomerate of moving billions of dollars in and out of Adani-controlled entities, often without disclosure. 

Though Adani vehemently denied Hindenburg’s claims, it sent the group’s shares into a free fall, shaving billions from the fortune of the world’s then third-richest man.

Adani’s extensive ports, power and infrastructure empire pulled a $2.5bn share sale plan and saw $140bn wiped off its market value.

There was other money made on the trade, however.

In a blog post on Monday, Anderson disclosed that India’s main securities regulator had issued a “show cause” notice to the US-based hedge fund, often the precursor to a formal regulatory action.

In the 46-page notice, the regulator named US hedge fund Kingdon Capital Management as a silent partner to Hindenburg’s short bet against Adani, reports the FT.

For years, it has been known that Anderson, a dogged researcher who has successfully taken on companies such as hydrogen truck seller Nikola Motors and Carl Icahn’s public holding company, has worked with partners to finance his trades due to his firm’s small size. Activist short sellers tend to sell research to third parties who in exchange provide cash to execute their trades.

Many on Wall Street have wondered how Hindenburg put on his trade and who backed him. 

Kingdon is an established New York-based hedge fund founded in 1983 and owned by financier Mark Kingdon. It is one of Wall Street’s oldest hedge funds, but has seen assets shrink from nearly $5bn after the 2008 financial crisis to $640mn as of March.

According to the regulator’s report, Kingdon stood to make about 70 per cent of the gains from Adani, while Anderson’s cut was about 30 per cent.

After expenses related to its two-year investigation into Adani, “we may come out ahead of break-even on our Adani short”, said Hindenburg.

In its notice, the regulator said Hindenburg “deliberately sensationalised and distorted certain facts”. (Shares in Adani group have recovered most of their value).

Hindenburg called the allegations “an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India”.

It pointed to numerous media reports that have brought new colour to Adani’s operations, including a number of FT investigations. 

The probe has also roped in one of India’s largest banks. Kotak Mahindra Bank “created and oversaw the offshore fund structure used by our investor partner to bet against Adani”, Hindenburg said.

Kotak Mahindra International Limited and its K-India Opportunities Fund “unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the fund. The fund was never aware that Hindenburg was a partner of any of its investors,” it said. 

Wall Street’s China expansion goes into reverse

When JPMorgan chief executive Jamie Dimon visited Shanghai in May, he said parts of the bank’s business in China had “fallen off a cliff” in recent years. 

New data-crunching by DD’s Kaye Wiggins and the FT’s Cheng Leng and Thomas Hale shows the bank is not alone. 

Of the seven Chinese securities units that are part of US and European banks — JPMorgan, Goldman Sachs, Morgan Stanley, UBS, Credit Suisse, HSBC and Deutsche Bank — six cut their workforce last year, and five either made a loss or reported tumbling profits. 

It is a far cry from the boom times of 2021, a record year for investment banks globally, when six of the seven made a profit in their mainland operations. In total, the seven units had 1,781 employees last year, down 13 per cent from 2022.

DD readers will be very aware that this is not just a China issue: banks eliminated a lot of jobs globally last year. The FT reported in December that banks shed more than 60,000 jobs in 2023. 

But the China cuts matter, partly because they’re a blow to earlier hopes that banks’ presence and returns in the country might keep growing even if things slowed elsewhere. 

Staff numbers in the China units had been rising every year since 2018, except for a less than 3 per cent drop in 2020 when Covid-19 restrictions made hiring difficult. Goldman Sachs had previously outlined a plan to double its workforce in China to 600. 

US-China tensions and China’s economic slowdown, linked to its property crisis, are part of the problem. So too are rules that mean listings of Chinese companies need regulators’ approval. IPOs in China have hit their lowest levels in 15 years, according to Dealogic data as of May. 

“The China market was seen as a source of revenue opportunity and risk diversification because it was not as correlated to the US economic cycle”, said Han Lin, China country director at consultancy The Asia Group. 

Some banks “are running out of patience when the opportunities in India, south-east Asia and the US are looking more promising”, he said.

UK fund with a thorny history in Russia 

London’s Gemcorp has emerged as one of Europe’s most daring emerging market funds, having made $6bn of bets on some of the world’s riskiest frontier economies since launching in 2014.

Over the past year the Mayfair investment firm has signed up a number of former top officials and politicians from Britain’s ruling Conservative party (until Thursday’s UK general election at least). 

Those include Lord Gerry Grimstone, Gemcorp’s new chair and City grandee and former UK investment minister under Boris Johnson, and Lord Edward Lister, who served for a brief period as Johnson’s chief of staff.

An FT investigation has found that these Tory alumni now work for a company that in the past engaged in activity seemingly aligned with Vladimir Putin’s diplomatic and commercial push into Africa, as the Kremlin sought to minimise the impact of western sanctions.

The story by Miles Johnson, Joseph Cotterill and Cynthia O’Murchu shines a light on Gemcorp’s past ties to Russia, including it being backed at launch by two Russian oligarchs with links to Sergei Chemezov, the powerful boss of Russia’s state weapons giant and a close friend of Putin.

Job moves

• UBS has appointed Nestor Paz-Galindo as Emea head of global banking. He retains his existing role as global co-head of M&A.

• Centricus has hired former UK chancellor of the exchequer Sajid Javid as a partner. He has been a senior adviser to the firm since 2023 and did not run for re-election as a member of parliament this year.

• Hipgnosis has announced that founder and chair Merck Mercuriadis will leave the UK-listed music rights owner. His departure will come into effect upon the closing of Blackstone’s proposed acquisition of Hipgnosis Songs Fund.

• Octopus Ventures has appointed Erin Platts as CEO. She will join the company in January from HSBC Innovation Banking, where she was CEO. Previously she was CEO of Silicon Valley Bank UK.

• Simpson Thacher & Bartlett has hired Hadrien Servais to lead its European private credit team. He joins from White & Case, where he was a partner and head of debt finance for Belgium and Luxembourg.

• Flutter has appointed former Walt Disney chief financial officer Christine McCarthy to its board. It also named Robert Bennett as a director.

Smart reads

Manufacturing shift Boeing’s purchase of Spirit AeroSystems, a supplier it spun off in 2005, is just one example of a US outsourcing model that went too far, The Wall Street Journal writes.

Local competition As Tesla sales continue to slow, homegrown Chinese producers Zeekr and Nio may turn out to be the bigger threat to BYD holding its market position, Lex writes.

Up selling Some of the world’s biggest packaged goods-makers are advertising new uses for old products at bumper prices, as they attempt to win back sales in the US’s more than $100bn personal care and beauty market, reports Bloomberg.

News round-up

Hedge fund giants Citadel and Millennium post strong first-half gains (FT) 

Bankers wary despite jump in US corporate fundraising (FT)  

Vista Equity in talks to hand over Pluralsight to creditors (Reuters)

Richemont taps Vacheron Constantin head to lead Cartier brand (FT) 

Boeing’s $4.7bn Spirit deal sparks fears over future of Belfast jobs (FT)