Adani’s Queensland coalmine cited in US investor’s claims of ‘biggest con in corporate history’

The ability of Adani Group to raise money will be curbed after scathing allegations in a report by an activist US short-seller, although surging coal prices that underpin the Indian conglomerate’s contentious Queensland operations will help alleviate some pressure, analysts say.

Adani, which operates the Carmichael coal and rail project via its rebranded subsidiary Bravus, is the target of US investment firm Hindenburg Research, which alleges the company has engaged in a “brazen stock manipulation and accounting fraud scheme”.

Shares in listed companies tied to the empire of Gautam Adani, the world’s third richest man, were immediately sold down after the report was published on Wednesday, erasing US$9.4bn (A$13.2bn) in value.

Hindenburg cited transactions connected to the Australian operations that it alleges may have allowed Adani to avoid disclosing large asset impairments to investors.

Those impairments could have weighed on the net income of its listed flagship, Adani Enterprises, but were instead housed in a private company linked to Adani interests, according to claims in the report.

The alleged transactions include:

• A private company called Carmichael Rail and Port Singapore Holdings with ties to Adani paid A$147m for unspecified “work in progress” assets from the Australian operations, without a detailed description.

• The same private company paid A$155m for the right to use the rail facilities at the Queensland operation.

• The private Carmichael company also received A$100m from an Adani subsidiary to pay off debt.

It is alleged the private company subsequently wrote down the value of those assets.

Separately, the Hindenburg report details a suspected related-party transaction, worth almost US$100m, whereby an Adani subsidiary allegedly charged one of the listed entities a security deposit to use the Adani-operated Abbot Point port facilities.

Hindenburg published its two-year investigation on Twitter early on Wednesday just 48 hours before Adani Group is due to attempt a huge stock market fundraising drive.

Adani Group said in a statement that the report was a “malicious combination of selective misinformation and stale, baseless and discredited allegations”.

Adani said the report was timed to undermine the company’s reputation and damage a huge market fundraising drive.

A spokesperson for the Australian business referred the Guardian to the Adani Group statement.

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Adani Enterprises is scheduled to launch India’s biggest public secondary share offering on Friday in a bid to raise US$2.5bn to fund capital expenditure and reduce debt.

Located in Queensland’s coal-rich Galilee Basin, the Adani project exported its first coal in late 2021. It has been a flashpoint for climate protests given it increases coal production at the same time as the global community is seeking to reduce emissions.

Activist investors like Hindenburg typically take a short position in a listed company, which makes money if the stock falls, before releasing their reports which can lead to sustained pressure on a share price.

“Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations,” the report claims.

Tim Buckley, the managing director of Climate Energy Finance, said financial restructuring at Adani leading up to the pandemic had made it less susceptible to a shock, but the report would dissuade some investors from backing the conglomerate.

“It will hamper their access to Wall Street, categorically,” said Buckley, who has opposed the Carmichael project.

“Adani is not, in my view, a house of cards unless the Hindenburg research results in a serious, credible, full response from the SEC,” he said, referring to the US securities regulator.

The Australian Securities and Investments Commission did not immediately respond to questions on Thursday, a public holiday. The Queensland government’s resources department also did not immediately respond.

Sustained regulator or investor pressure on Adani could force the company to divest assets, as has been the case in other short-selling campaigns. But surging coal prices underpinned by Chinese demand and prolonged disruptions to Russian supplies have made even the most marginal coal projects profitable, easing some financial burdens.

“Even Carmichael is making money at current prices,” said Buckley.