Adani Group is eyeing litigation against Hindenburg Research as it tries to right itself after the New York short-selling firm’s fraud allegations cost it billions—but the Indian conglomerate’s US legal options are limited.
Adani’s losses topped $110 billion in recent weeks, as investors dumped shares after the Hindenburg report. Adani Group has called the report “bogus.”
Companies targeted by short reports often look to respond by suing the report issuers. Those that follow through with litigation don’t have a track record of winning. The cases are hard to prove because they often hinge on defamation claims, and the First Amendment provides a strong line of defense for short-sellers, attorneys said.
“Such litigations are fact-specific but often boil down to courts balancing between protecting the right to offer opinion and permitting the ability to manipulate information for financial gain at a cost to companies and their investors,” Akin Gump Strauss Hauer & Feld LLP’s Joseph Sorkin said.
Adani’s situation spotlights legal challenges in dealing with short-seller reports that deal blows to companies’ fortunes. But other recent examples also underscore companies’ continued wrangling with an investment research subsector that enjoys the same freedom- of-speech rights afforded broadly to media companies.
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