A US-based hedge fund played a key role in the Hindenburg-Adani drama that unfolded last year, revealed market regulator SEBI’s show cause notice to Hindenburg Research on June 27.
This was confirmed by Hindenburg Research through a blog post in which it said it was short on Adani shares 'through a deal with an investor partner who was indirectly short Adani derivatives through a non-Indian, offshore fund structure'. The investor partner in the picture was Kingdon Capital Management.
In January 2023, Hindenburg Research had released a report, accusing Adani group companies of stock manipulation and accounting fraud.
Here is a quick rundown of Kingdon Capital and its founder Mark Kingdon
Also read: Hindenburg attacks India regulator, reveals small Adani profit
What is Kingdon Capital Management?
Kingdon Capital is a US-based Investment Management company established by hedge fund manager Mark Kingdon. The company caters to HNIs and institutional clients with a focus on investing in "growth and value stocks". They are also known for long and short equity strategies for maximising returns in currency futures and options.
How big is Kingdon Capital?
The company currently has seven overseas clients with assets under management (AUM) of $823.48 million (as of March 2024). As per their latest 13 F filing ( for Q1 2024), the firm reported $915.77 million in managed securities. Kingdon Capital Management's top holdings currently include - The Select Sector SPDR Trust - The Financial Select Sector SPDR Fund, Tenet Healthcare Corporation, FTAI Aviation, APi Group Corporation, and Praxis Precision Medicines.
Who is Mark Kingdon?
Mark Kingdon is a veteran hedge fund manager. Kingdon started his career in 1973, after graduating from Columbia college. He began as pension fund administrator, before joining Century Capital Associated in 1975. He started Kingdon Capital Management in 1983 with an initial capital of $2 million. By 2007, the firm grew and became a $5.9 billion hedge fund. It was also named as a one of the 100 Hedge Funds to Watch.
The fund has provided CAGR of 22.99 percent over 1983 to 2000.
What is SEBI alleging?
As per the Sebi show cause, Kingdon had a profit-sharing pact with Hindenburg, with the latter receiving 30 percent of any gains from trading securities based on its research, according to the Sebi letter. For the Adani short bet, the cut was pared to 25 percent. The letter further noted that by the end of December, Kingdon begun subscribing into the shares of the fund, and in January transferred $43 million in two tranches to build short positions in Adani Enterprises.
Also read: Kotak Mahindra Bank issues clarification on public statements made by Hindenburg
How much money did Kingdon Capital make on the short positions in Adani stocks?
Hindenburg Research said it made “around $4.1 million in gross revenue through gains related to Adani shorts from that investor relationship.” Since it was a profit-sharing arrangement in the ratio of 25:75, Kingdon Capital could have made three times what Hindenburg Research made—around $12.3 million.
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