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“Unprecedented Situation”: Adani Enterprises Pulls $2.4 Billion Share Offering


“Unprecedented Situation”: Adani Enterprises Pulls $2.4 Billion Share Offering

Update (1230ET):

Adani Enterprises pulled its $2.4 billion follow-on public offer (FPO) of shares after US short-seller Hindenburg Research unleashed a short attack on the Indian company. 

Adani Enterprises said the company’s board decided not to go ahead with its FPO due to the “unprecedented situation and the current market volatility.” 

The company said their book-running managers would refund investor proceeds held in escrow — one of those investors was Abu Dhabi’s royal family

The board “felt that going ahead with the issue will not be morally correct.” 

“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of service our debt,” the company stated. 

Earlier today, Adani Enterprises shares crashed by 28% as a crisis in confidence plagues Gautam Adani’s corporate empire. 

Pershing Square’s Bill Ackman has been highly critical of Adani Enterprises since Hindenburg released their report one week ago. This morning, the billionaire tweeted:

“I would not find it surprising if the @AdaniOnline offering was rigged with affiliated buyers in addition to some real institutional participants like ADIHC. This would explain the low retail participation and today’s price decline.”

We noted earlier that Credit Suisse designated a zero lending value for bonds sold by Adani Ports and Special Economic Zone, Adani Green Energy, and Adani Electricity Mumbai. 

Things appear to be materially worsening for Adani. He also lost Asia’s richest person status. 

*   *   * 

Turmoil remerged in the Adani group Wednesday after a top Swiss bank stopped accepting bonds from companies tied to Gautam Adani’s corporate empire for margin loans. 

Bloomberg reported Credit Suisse Group AG halted the acceptable of bonds of Adani’s companies as collateral for margin for banking clients. This news led to further declines in Adani shares and dollar bonds. 

The Swiss lender’s private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd., according to people familiar with the matter, who asked not to be identified discussing private information. It had previously offered a lending value of about 75% for the Adani Ports notes, one of the people said.

When a private bank cuts lending value to zero, clients typically have to top up with cash or another form of collateral and if they fail to do so, their securities can be liquidated. –Bloomberg 

Shares of Adani Enterprises crashed, closing down by more than 28%. Market cap losses across all Adani companies hit $93 billion since US short-seller Hindenburg Research accused it of corporate fraud one week ago. 

Hindenburg’s allegations sparked a crisis of confidence for Adani despite Adani Enterprises completing a $2.5 billion follow-on stock sale Tuesday, which briefly calmed investors. 

“Caution on Adani group stocks has increased after the news on action taken by Credit Suisse. 

“This can put a financing hurdle for the group’s further growth,” said Sameer Kalra, founder of Target Investing in Mumbai. 

Dollar bonds of Adani Group also plunged. 

Peter Garnry, head of equity strategy at Saxo Bank A/S, said the problem now is “the dynamics are becoming a self-reinforcing negative feedback loop and investors are now just dumping the shares and asking questions later.”

Garnry added: “This is potentially a bigger problem for Indian equities which have done so well during the pandemic as China pursued its zero Covid policy. The long-term ramifications could be quite negative.”

The worsening rout in Adani weighed on India’s broader equity benchmarks. 

The contagion has been quick, and so has the wipeout of Adani’s personal wealth, plummeting by $44 billion to about $72 billion in one week, according to the latest Bloomberg data. 

Adani is no longer the richest person in Asia. 

Tyler Durden
Wed, 02/01/2023 – 12:30

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