Does the Closure of Hindenburg Research mean companies can breathe easier?

One of the most notorious short-sellers Hindenburg Research has announced it is closing its doors. Its founder Nate Anderson began it eight years ago but is closing it down. The reason he gave? Anderson said the plan had always been to ‘wind it up once we had finished the pipeline of ideas we were working on’ and noted he wanted to spend more time with his family and friends.

Hindenburg Research made some big hits in its time

The biggest hit was Adani. Hindenburg Research published a note accusing it of engaging,’ in a brazen stock manipulation and accounting fraud scheme over the course of decades,’and labelled it,’ the largest con in corporate history’. Adani did what all companies would do, issue a report denying the allegations. It had a major hit on Adani’s share price. Adani has had other troubles since then, but the fact its shares more than halved in the weeks after the report, never reached its all time highs ever since, but rose 9% on the day the news Hindenburg Research announced it was disbanding shows the hit it had on the company.

There were others too. Hindenburg released a report on Block (formerly Square) in March 2023, making accusations including overstating its genuine user counts and understating its customer acquisition costs. Block ultimately recovered, but it took a 15% hit on the day the report was released.

One of its more recent was former ASX-listee Sezzle. With the stock having crashed as interest rates rose and then rising again as it purported to be moving to profitability, Hindeburg claimed it was boosting its subscription numbers (counting those enrolled into subscriptions without awareness) and that it was only funding itself through external capital.

So are short-sellers gone?

Many companies will be breathing sighs of relief with such a notorious short-seller is gone. If Hindenburg caused a company as big as Adani to stumble, so it could hit any company at any time and the impact could occur before any chance could be made for a rebuttal of those claims.

The reality is that Hindenburg was never the only short-seller. There are plenty of others out there that can impact ASX stocks. One is J Capital that notoriously caused an impact to WiseTech’s share price in 2019...seems like a lifetime ago, doesn’t it?

A somewhat more recent impact was on Vulcan Energy Resources in 2021. Remember how that ended? Vulcan took it to court and J Capital was forced to pay a settlement, make an apology and was restrained from disseminating, publishing or republishing any matter concerning Vulcan, its directors and officers again.

But even in the absence of specialist firms, retail investors do short stocks. If it is just one investor, no one really cares. But some stocks have over 10% of their shares shorted. As of mid-January 2025, the most is Guzman y Gomez (ASX:GYG) that has over 25% of its shares shorted. Something will give there – eventually it may miss one prospectus or growth forecast and it’ll crash, or the shorters will sell out one by one.

Conclusion

At the end of the day, as happy as many companies will be to see the end of Hindenburg, shorting as a practice will go on, and remaining firms may target stocks from time to time. Companies do have the option of suing if they think allegations are defamatory of its board and management. But they can also prove them wrong and make up the lost ground – that is what happened with WiseTech. At the end of the day, the best companies can do is run the companies as best they can…and prove the doubters and shorters wrong.

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