Hindenburg Research sees itself confirmed by the MSCI decision.
(Photo: Reuters)
Bangkok The ailing Indian industrial conglomerate Adani will in future have less weight in the share indices of the provider MSCI. This was announced by the financial service provider on Friday shortly before the start of trading on the Mumbai stock exchange.
The group of companies, which has lost more than USD 110 billion in market value as a result of allegations of fraud, is now facing new capital outflows: Passive index funds that track MSCI indices now have to sell parts of their investments in order to comply with the new weightings.
Behind the MSCI decision is a reassessment of several offshore companies that hold a significant stake in Adani shares – and whose backers are unknown. MSCI had already announced the day before that there were uncertainties with regard to certain shareholders and that “according to our methodology, they should no longer be classified as free float”. The reweighting of the papers in the MSCI indices is the direct consequence of the changed classification.
The offshore companies are at the center of allegations of fraud by the US short seller Hindenburg Research, which triggered the crash in Adani shares with a critical report. The company’s founder, multi-billionaire Gautam Adani, lost his place among the three richest men in the world and his title as Asia’s richest man.
MSCI decision following fraud allegations: Adani stock weight reduced
Hindenburg Research alleges that the offshore companies of unknown ownership are in fact controlled by the Adani family and were used, among other things, to manipulate the Adani companies’ share price. Adani denies the allegations. Hindenburg founder Nate Anderson wrote on Twitter that he felt vindicated by the MSCI decision.
The reweighting in the MSCI indices affects the holding company Adani Enterprises, in which the group bundles many of its business activities. Also reclassified are listed subsidiaries Adani Total Gas, Adani Transmissions and recently acquired cement maker ACC.
The changes will take effect at the end of the month. As a result, passively managed equity funds would inevitably have to sell Adani shares in order to keep deviations from the index as small as possible, commented equity analyst Brian Freitas, founder of analysis house Periscope Analytics. He reckons this alone will drain more than half a billion dollars from the Adani papers.
Norwegian sovereign wealth fund sells Adani shares
Meanwhile, active investors are also putting pressure on: The 1.4 trillion dollar sovereign wealth fund from Norway announced on Thursday that it had disposed of all Adani papers in its portfolio. The fund had already significantly reduced its holdings in the Adani Group last year.
The bad news put Adani shares under pressure again on Friday: Adani Enterprises started trading down ten percent. By noon local time, the share was able to make up for the losses. The shares of Adani Green Energy, Adani Total Gas and Adani Transmissions were down five percent and thus reached a new low since the affair began.
More: Financial regulator Bafin intervenes after billions crash.