Looks like Hindenburg has done its homework on Adani, says NYU professor

‘Corporations are more likely to be corporate autocracies in practice... terrifying when the holding company is controlled by a family, and dangerous when that family holding company has political connections’

Updated - February 07, 2023 07:41 pm IST

Published - February 07, 2023 09:03 am IST

Aswath Damodaran

Aswath Damodaran | Photo Credit: By arrangement

Hindenburg Research has done its homework on the Adani Group, said Aswath Damodaran, a renowned professor of finance at New York University. But the New York-based investment research firm risks losing credibility if the Group manages to prove even just some trivial components of Hindenburg’s report as wrong, he said in an interview with The Hindu.

It has been more than a year since the U.S. and many other stock markets peaked. So, do equity investors today have a lot of good buying opportunities? When do you expect stocks to resume their uptrend?

To be honest, why does it matter, if you are an investor? If you are a trader, you care about price moves in the here and the now, but I am not. As long as the market when you get in is not massively overvalued, and you have found a stock that you believe if offered to give you good value for the price you are paying, does it matter to you that the stock may go down a few days, weeks or even months before it delivers? If your answer is yes, you may not be temperamentally suited to investing, but trading to be your game.

How do you view corporate governance and the regulation of equity markets in India in the wake of the Adani-Hindenburg tussle?

Corporations are shareholder democracies only in theory and are more likely to be corporate autocracies in practice. That, of course, becomes worse when you invest in a holding company, which is a holding pen for a dozen or more different companies; terrifying, when that holding company is controlled by a family, that can move value across the held companies; and dangerous, when that family holding company has political connections. I would take the Hindenburg Group’s thesis with a grain of salt, because they do have an interest in it being true, but it looks like they have done their homework. My critique is that by making so many different assertions of wrongdoing in the company, some trivial and some massive, they risk losing credibility, since all that Adani has to do is to show that one of the trivial components of the thesis does not hold up.

What does the future hold for cryptocurrencies after their crash in 2022? Will they make a comeback, and will central banks allow that to happen?

Since very few were using them in actual transactions prior to 2022, and very few are using them now, I am not sure that much has changed. Bitcoin is an inefficient currency and a poor-performing collectible, leaving open the question of what exactly you were getting for $50,000 in 2021, $20,000 today or $2,000 or $200,000 a year from now.

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