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By Andy Mukherjee<\/strong><\/p>\n Gautam Adani, the Indian tycoon under attack by a New York-based short-seller, has outdone his accuser 4:1: The rebuttal put out by his group Sunday night in India runs into 413 pages. Hindenburg Research\u2019s allegations of stock-price manipulation and accounting fraud were contained in a 106-page report, which has now been denounced by the conglomerate as \u201cnothing short of a calculated securities fraud under applicable law.\u201d Is the response, backed by the claim that the group may pursue remedies, as weighty as it is voluminous? Perhaps it doesn\u2019t really matter. (Also Read | <\/strong>‘Fraud cannot be obfuscated by nationalism’: Hindenburg’s response to Adani<\/strong><\/a>)<\/strong><\/p>\n That\u2019s because the fate of Adani\u2019s vast corporate empire will be decided by what sounds like a rounding error for one of the world\u2019s wealthiest businessmen: In the ongoing 200 billion rupee ($2.5 billion) public offer by the group\u2019s flagship, large anchor investors have already been allotted about 60 billion rupees of shares at the top end of the per-share price band of 3,112 rupees to 3,276 rupees. But following the Hindenburg report, the Adani Enterprises Ltd. stock nosedived by nearly 20% over two trading days last week and closed at slightly above 2,761 rupees on Friday. (The shares were up as much as 10% in early trade in Mumbai on Monday.)<\/p>\n In other words, the firm is asking investors to buy something from it that\u2019s available in the market for less. Institutions and high-net-worth individuals might still pick up their assigned quotas \u2014 after all, a failure of the share sale could dent investor confidence in India and cause huge collateral damage to the rest of their portfolio. The only constituency that remains to be convinced is retail, who need to put up 70 billion rupees, or less than $1 billion. (Also Read | <\/strong>Most Adani stocks drop as rebuttal draws Hindenburg response<\/strong><\/a>)<\/strong><\/p>\n Even if there are some small investors out there who want to make up their minds after digesting Adani\u2019s answers to the 88 questions posed by the short-seller, odds are they won\u2019t be able to. At least not by Tuesday, when the public offer closes in India. They have to take a leap of faith by ignoring the beaten-down price. They\u2019ll assume that professional investors, analysts and the media are weighing the evidence. But with Hindenburg coming up with another note, in which it says Adani has failed to specifically answer 62 of its 88 questions, there\u2019s just too much information to process quickly. That will force people to judge the situation according to their prior political beliefs. \u201cFraud cannot be obfuscated by nationalism,\u201d says Hindenburg. Nationalism, however, can shift the perception battle. And that\u2019s what matters right now.<\/p>\n If the subscriptions come in and the share sale concludes, the beleaguered Indian billionaire gets the breathing room to take out the shorts. Most Indian market participants I spoke to over the weekend believe that funding commitments will eventually come through. Adani, on last count, was personally worth around $93 billion. As one veteran investor in Indian markets mused in a phone conversation, \u201cHow can Adani be the country\u2019s most powerful business magnate and not manage to raise less than a billion dollars? I can hold one of those two opinions, not both.\u201d<\/p>\n Still, it\u2019s a tricky situation: Adani has denied reports that it\u2019s thinking of extending the public offer or lowering the issue price. Those tactics could have ramifications beyond stock markets. The businessman from Prime Minister Narendra Modi\u2019s home state of Gujarat is a huge investor in India\u2019s ports, airports, roads, data centers, grain storage silos and solar farms. The government in New Delhi, looking to give a final push to infrastructure in Wednesday\u2019s annual budget, would have to rethink its economic strategy ahead of next year\u2019s general elections if political opponents pounce on Modi. If the share offer flops (or even wobbles), there could be a public uproar over the entanglement of nation\u2019s state-owned banks and life insurer in the debt and equity of a highly leveraged tycoon. (Also Read | <\/strong>‘Hilarious beyond belief’: Adani’s \u2018attack on India\u2019 claim draws jibe from Oppn<\/strong><\/a>)<\/strong><\/p>\n With so much riding on one share sale, it\u2019s easy to see why Hindenburg went public with its report last week. It\u2019s unclear just how large the short positions are, and who\u2019s behind them. Hindenburg\u2019s report only discloses that they are overseas in \u201cU.S.-traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities.\u201d That, too, is a clever strategy. Within India, any bet on a stock price to fall must be implemented by borrowing shares: So-called naked short sales aren\u2019t permitted. Company managements can pick bearish bets and squeeze them out. Holding on to a position for any length of time through local derivatives could also be prohibitively expensive.<\/p>\n Things can be much easier if, for instance, a large family office based overseas decides to put real money behind Hindenburg\u2019s report outside India. It could go short via a dollar-denominated total-return swap taken from the trading desk of a mid-sized international bank. (Large financial institutions may not want to jeopardize their India franchises for bespoke deals like these that may upset the regulator in India).<\/p>\n Whatever the modus operandi behind the short sales, so far it seems to be working: The group has lost $50 billion in stock-market value over two trading days. Last week’s plunge in its dollar bonds accelerated on Monday morning. Clearly, bond traders aren\u2019t entirely convinced by Adani Group\u2019s response. Or perhaps, the fixed-income market, too, is assessing the domestic share sale, the one domino Adani can\u2019t allow to fall. All weapons are legitimate in what\u2019s shaping up as an epic battle for public opinion \u2014 including information overload.<\/p>\n This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.<\/i><\/p>\n Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia.<\/i><\/p>\n<\/div>\n