The Question
What is the secret to happiness?
Talking Points
- More than two million French marched against pension reform
- Russia launched a new offensive around Bakhmut
- A suicide bomber killed 101 at a Peshawar mosque
- Myanmar marked the second anniversary of the civil war
- Mass polluters ExxonMobil and Shell recorded record profits
- Republicans lined up to take on Trump
- A spy balloon sent America into a tizzy
- Tom Brady retired. Again.
- Big Tech earnings painted a gloomy picture for 2023
- The Celsius report findings: crimes the whole way down
Deep Dive
Asia's richest man has watched a quarter of his fortune evaporate in a week. An industrial empire is teetering. And it's all because of one teeny-weeny little memo.
A perfect industrialist
Gautam Adani should need no introduction. But we'll belabour with one anyway. Until quite recently, he was the richest man in Asia, and the fourth richest in the world. It has been a precipitous climb to the top: Adani did not complete his secondary or tertiary education. Instead, as the most enterprising of Gujaratis do, he went to Mumbai to make his name, and fortune. In his 20s, he imported or manufactured unattractive-but-useful things like PVC and industrial polymers. In his 30s, he owned the largest private port in Gujarat. Then came the digging and burning. Coal means power. Both kinds. The corporate hagiographies cherish him as nothing less than the embodiment of modern India: shrewd, resourceful, self-made.
His conglomerate, a formation of seven huge public companies and countless private ones, leaves its handprint across the length and breadth of India. At the centre of it all is family: who else can you trust on your board or in the c-suite? But unlike his great rival Mukesh Ambani, whose ambition seems to be for his countryfolk to spend every single second interacting with an Ambani-owned brand, Adani fits an older model of industrialist. He's a man of smokestacks and heavy machinery. His companies pave roads. They erect industrial-scale farming operations, dredge ports, alchemise vast quantities of industrial chemicals, burn coal, and manufacture solar panels. It is tangible and solid. And the Adani name is always somewhere on the horizon. But the last two weeks have shown us just how illusory the tactile can be.
Duelling memos
Companies don't just grow on a general rags-to-riches vibe, or the fickle smiles of financial gods. They grow by borrowing mountains of cash. Adani has always been very clear about this plan: to hugely leverage one unit of his empire - to fund the growth in another. And, when Adani's net worth crested at $150bn last September, you'd have admitted that the strategem was working splendidly. Though perhaps a little too well. Between 2018 and 2022, the holding entity (Adani Enterprises) enjoyed a 3,000% jump in its share price. Enough to make one start asking questions. Enter, Hindenburg Research. A small, diligent firm in New York that describes itself as "a specialist in forensic financial research". It's a short-seller with exceptional pedigree. Hindenburg were the ones who, in 2020, knocked Trevor Milton off his perch at the pretend EV-manufacturer Nikola. Now it turns out they've been keeping tabs on Adani.
On January 24, Hindenburg Research released a memo about the Indian conglomerate. It ran to 106 pages of detailed allegations and contained 88 questions. But that wasn't all. Tone is everything, and somewhere in the report, Hindenburg described Adani as "the largest con in corporate history". Come again?
According to Hindenburg, the conglomerate has been "engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades". Specifically, it alleges that Gautam's brother Vinod uses "a vast labyrinth of offshore shell entities" in the Mauritius to funnel billions from privately-held entities into public companies. And that the preferred auditor "hardly seems capable of complex audit work". That, intentionally or otherwise, seems to be a recurrent theme in such tales. The regulator got a whack too . Hindenburg avers that the Adani inner sanctum owns 75% of four subsidiaries, which would have triggered delistings "were Indian securities regulator SEBI's rules enforced". Ouch.
The bombshell report landed on the very day that the Adani Group opened a $2.4bn equity sale. It rattled investors and shares across the group tanked — some down to the 20% daily limit. In just six hours of trading, Gautam Adani himself lost $20bn, or 20% of his fortune. That puts him fourth on the leaderboard of single-day losers , behind Elon Musk, Mark Zuckerberg, and... Elon Musk. The Adani Group needed a response, to brush off the short action. On the 29th, it unleashed its counter-battery fire. In a 413-page epic, the conglomerate waxed lyrical on Indian history and culture. It even compared the Hindenburg report to the Amritsar Massacre. Pull the other one. The report contained 330 pages of court records, and a further 53 of publicly-available-but-mostly-irrelevant information. A measly 30 pages were spent on the Hindenburgs. The gentleman doth protest... not enough.
Cavalry or calvary?
The whole thing about the Adani response is that it is mostly drivel. One notably frothy passage read: "This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and ambition of India." It's all a bit sniffy (How very dare you!). This week, woe became wipe-out. As of Friday, $105bn had been wiped off Adani companies. Gautam Adani has lost a quarter of his fortune. Early in the week, some hoped that Adani Enterprises might still pull off its share sale. Support had arrived on horseback from the Emirates: the Abu Dhabi International Holding Co. pledged a cool $400m to keep the sale alive. A handful of other famed Indian tycoons (Sajjan Jindal and Sinal Mittal) chipped in too, and by Tuesday the round was fully subscribed.
But the losses kept mounting. And the sale was humiliatingly called off on Wednesday. From its heated conference room in Manhattan, Hindenburg had gummed up the hot machinery of the Adani money-maker. The repercussions are manifold. Unless Adani can find a persuasive answer to Hindenburg, the mountain of cash it urgently needs is going to become hard to find. A few captains of industry, and the Emiratis, may be willing to open their pocketbooks sight unseen, but Citigroup and Credit Suisse are slightly more discerning. Although given their recent histories... the emphasis should be on "slightly". Still, both are refusing to accept Adani Group securities as collateral on margin loans. The group has $700m in debt repayments due this quarter, and right now five of the seven subsidiaries do not have the liquid assets to cover their liabilities.
It sounds like a recipe for disaster. But you can expect significant support to arrive from New Delhi. The secret sauce to Adani's success is his close alignment with Narendra Modi's national projects. Development needs industry. And over the last decade, Adani and the BJP have been thick as thieves. Perhaps the Adani response did have one thing right: perhaps in questioning it, the growth story of India is being questioned. But it still needs a more convincing answer than Adani Enterprises is offering so far.
Worldlywise
Winners and Losers
📈 Smug Europeans
Last year, renewables overtook gas as the largest source of electricity in the European Union. Yeah, yeah, enjoy the victory lap. The explosive growth in solar and wind investment over the last three years pushed the combined contribution (22%) above that of gas (20%). It's expected that carbon intensity of EU electricity will fall another 20% in 2023.
📈 Stupid animals
It's been an exciting week for species that were either too stupid, or irretrievably maladapted, to survive on this planet. Some bright sparks have decided to de-extinct the dodo : an animal that would fall for the wallet inspector bit every time. The US genetics firm, Colossal Biosciences (which has the same comforting ring to it as Omni Consumer Products or The Tyrrel Corporation) has promised to add this very gullible bird to its roster of species to reanimate. Admittedly, the dodo would be a funnier animal to bring back than the woolly mammoth or the sabre-toothed tiger.
📉 Admirers of King Charles' face
There are many people who, due to a strange parasocial relationship with the royal family (or a generalised yearning for the golden years of feudalism), look upon King Charles with fondness. We'd like to apologise to them up front: the radical anti-imperialist third-world Maoists in the Australian government have declined to print the British king's mug on their $5 bill. The bold path the Australian republican movement is taking can best be summed up as: it's not me, it's you.
📉 Dallas Zoo
This is a family column so we won't curse, but what in tarnation is going on at Dallas Zoo ? There has been a spate of break-ins, interference with enclosures, the theft of two emperor tamarin monkeys and a clouded leopard cub, and the assassination of a lappet-faced vulture. Huge L for Dallas Zoo. Sort it out.
Highlights
The Image
The protests in Peru are not dimming. For the first time in hundreds of years, the Indigenous and rural population had a voice in Pedro Castillo. His ouster has opened deep, old wounds. Photo supplied by Reuters .
The Quote
"I actually threatened to burn this place down and it actually burnt down coincidentally. So yeah, shit happens."
– A Melbourne man gives a masterclass in self-incrimination while standing next to a burnt-out floating nightclub after an arson attack . There are a few pretty clear rules for doing crimes: don't film it, never speak to the police, and don't tell a news crew about your intention to commit arson while near the scene of the crime.
The Numbers
15,000 Lebanese pounds to the dollar
- The local Lebanese currency officially trades at 1,507 pounds to the dollar and has done for 25 years. The trouble is that, since the economic implosion of 2019, the pound has lost 97% of its value . On the black market (where everyone does their business) it trades at 56,000 pounds to the dollar. This week, Lebanon's central bank Governor (Riad Salameh) announced that local currency would be officially devalued by 90% and now sit at 15,000 pounds to the dollar. So far, but not far enough.
1.5 hours less work each week
- If the goal of wealth is to work less, then between 1980 and 2019 Americans failed. In that time, the top 10% of male earners added 5 hours to their work week. Thankfully, something twigged in 2019, and over the last three years that same group won 1.5 hours per week back for their lives .
The Headlines
"Angry Football Fans Keep Punching Their TVs" — The Atlantic . That's right.
"Lusty quoll's sleepless habits could see species rooted"
— AAP . Perfect.
The Special Mention
At risk of seeming biased we are again awarding our Special Mention in the field of "Goose Of The Week" to the Fédération Internationale de Football Association . This week FIFA opted to bring on Visit Saudi as its sponsor for the Women's World Cup in Australia and New Zealand. Now imagine the game Pong, except your head is the ball, one paddle is women's sports, and the other is Saudi Arabia's treatment of women.
The Most-Read Article
'He claimed to be a holy man. But a Dances with Wolves star was luring young girls into a sex cult, authorities say'
The Best Long Reads
- Businessweek out-picks the index funds
- Foreign Affairs sets its eyes on Crimea
- The Financial Times retires at 62
Thomas Wharton
Senior Editor
The Answer...
This 80-year Harvard Study of Adult Development found three strong signals from their enormous data set. Loneliness kills, a handful of quality relationships are better than many shallow ones, and strong relationships are good for your health . If you are struggling to know where to start on forming new relationships, just reply to this email and we can chat about Warhammer 40k, the miniseries Station Eleven, and hummus.
