BUSINESS REFLECTION: After the Bell: The Adani Group and the ancient art of pooping and scooping

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The Indian stock market has seen the golden rules of ‘poop and scoop’ and ‘pump and dump’ applied at such a scale that it’s mind-boggling.

Every investor knows the two golden rules for making quick money on the stock market. The usual way, or should we call it the slow way, to make money on the stock market is to search for alpha, invest sensibly over the long term, diversify, find a good money manager, start investing early, etc.

Adani Enterprises, a diversified industrial powerhouse, chugged along happily for years and years trading at around 150 rupees on the BSE until 2020, when it blasted off. The company reached a peak last December, hitting 4,161 rupees. Part of the reason has to do with coal, since the group is not only a big coal miner but a huge coal trader as well . Coal is estimated to constitute about 60% of its total earnings.

In some ways, this is a forced move, because if the market is expecting you to grow at an exponential rate, you’d better start showing some of that growth, even if you have to buy it. In some ways, doing so constitutes the “dump” part of “pump and dump” because existing shareholders do get diluted somewhat in this process .So, in November, the company announced it would be raising about $2.

Hindenburg’s report claimed that the Adani empire was the “biggest con in corporate history” and that it has engaged in a “brazen stock manipulation”. They also point to an “accounting fraud scheme” and loading companies with so much debt as to put the entire group on a “precarious financial footing”.

 

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