In response to claims of stock market manipulation and accounting fraud that caused investors to dump its equities, the Indian company Adani Group said it was exploring legal action against the American short-selling firm Hindenburg Research.
On Friday, shares of the company fell up to 20%.
Trading in some Adani companies was delayed or temporarily halted on Friday due to the intense dumping of shares tied to Adani, which destroyed billions of dollars of market value for India’s second-largest conglomerate.
Adani Group companies have primarily seen the impact despite Friday’s 1.5% and 1.6% declines in India’s Sensex and Nifty indexes.
But analysts warned that there would be broader effects if the selling continues.
Mining coal to support India’s rapidly expanding economy has made Gautam Adani and his family extremely wealthy.
The conglomerate’s companies operate in various sectors, including construction, media, renewable energy, defense production, and agriculture.
According to Bloomberg’s Billionaire Index, Adani’s net worth has increased roughly 2,000% to as much as $125 billion in recent years.
In September, because of a rise in the value of his seven listed companies, he momentarily overtook Amazon CEO Jeff Bezos to claim the title of second-richest man in the world.
With a fortune worth $113 billion after this week’s losses, Bloomberg’s index placed him as the fourth-richest person in the world.
Shares of Adani were “trading at ridiculous levels,” according to investment adviser Shashank Aggarwal of Addwise Capital.
“There is no doubt that the report has sparked a correction.”
After Hindenburg Research published a report stating that it was betting against shares in companies inside the Adani empire, investors started selling their shares.
According to Hindenburg, the seven major Adani-listed firms have an “85% downside, just on a basic basis, because of sky-high valuations.”
According to Brian Freitas, a Periscope Analytics analyst based in New Zealand who has studied the Adani Group, “other than a change in a mood where investors start doubting the accounting of every company,” he does not yet see a risk of broader financial contagion.
Prices would drop even more if Adani’s lenders demanded more security, and the shares used to secure the loan had to be sold to meet those demands.