Hindenburg Research's spectacular short bet against India's Adani group could lead other investors to consider using similar strategies in the South Asian nation but regulatory hurdles and shareholding constraints will make them tough to implement.
Hindenburg's bold bet against Adani could be seen as a template to its peers, as short-sellers look beyond the traditional markets for new targets that have seen a meteoric rise in stock values in the last few years.
"Many companies are promoter or founder led companies and they hold a high percentage of the shareholding," said Sharmila Gopinath, specialist adviser to the Asian Corporate Governance Association. In India, for example, naked short-selling, which involves selling shares without first borrowing them, is not permitted. Such positions are possible in some developed markets.
Other major challenges for short-sellers in India include very high founder ownership, resulting in fewer investors available to borrow shares from, and very few companies having a deep pool of offshore securities, analysts say.
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