Almost a year ago, the legendary investigative firm Hindenburg Research left Wall Street. Its founder, Nathan Anderson, one of the most well-known “bears” in the U.S. financial market and the author of numerous “exposé” reports on public companies, posted a farewell letter on the project’s website in January. “We all worked incredibly hard [the team consisted of 11 people – ed.], focusing on accuracy and letting facts determine our words,” the financier noted. “Sometimes that meant we had to take risky steps and enter fights that were much bigger than any of us individually.”
In 2024, another similar project also left Wall Street — Citron Research — which stopped releasing negative reports after its founder, Andrew Left, was charged with $20 million in fraud and market manipulation. However, it was the departure of the largest player, Hindenburg, that marked the end of the era of so-called investment activism — the opportunity to profit from the decline in stock prices of public companies targeted by informational attacks from “independent” analysts.
Why has the stock market stopped trusting such analysis?
The Big Short Game
A few words about the practice itself. Activist investors examine financial statements and business models of public companies in search of illegal practices: corporate fraud, fabricated reporting, stock-price manipulation, or other potentially damaging issues. Sometimes information is provided by former employees eager to “get back at” their former employer. The collected data is then processed and turned into an analytical report in which the authors publicly accuse their “targets” of breaking the law.
These materials are in some ways similar to journalistic investigations, but with one important caveat — their authors are financially interested in seeing the stock prices of the targeted companies collapse. Before publication, Hindenburg analysts and similar firms usually open short positions in the victims’ stocks. They borrow shares from brokers and sell them at the current market price. Their logic is simple: the report will trigger panic among shareholders, who will start dumping stock en masse, pushing the price down. Amid the sell-off, activist investors can repurchase the shares at a lower price and return them to the brokers. The difference between the sale and repurchase prices becomes their profit.
Hindenburg Research was the most famous practitioner of this strategy. Over seven years of its existence, dozens of corporations were hit by its reports, including Adani Group, Super Micro, Nikola Corporation, Icahn Enterprises, and others.
The informational attack on Adani Group alone led to a loss of $100 billion in market capitalization, and electric-truck developer Nikola went bankrupt altogether — despite previously being valued at more than $10 billion and having partnership agreements with GM.
A False Target
Not all of the “bearish” reports achieved their goals. Sometimes their claims had no factual basis, and the published reports resembled black PR more than evidence-based analysis. This is what happened with the Kazakh investment holding Freedom Holding Corp., which was targeted in 2023 first by Citron and then by Hindenburg Research.
Citron’s jab went unnoticed on Wall Street — the stock price did not move. Several months later, Anderson released his own bearish report, which led to a short-term drop in the stock. However, once market participants examined the substance of the accusations and recognized their baselessness, they stopped selling, and the decline ended. Freedom categorically rejected all allegations. Moreover, the law firm Morgan, Lewis & Bockius LLP and the forensic accounting firm Forensic Risk Alliance conducted an independent review and concluded that Hindenburg’s information was inaccurate. Deloitte, the corporation’s auditor, also found no violations.
The U.S. Securities and Exchange Commission (SEC), which licenses Freedom Holding Corp., called most of the accusations against Freedom unfounded. “The review showed that the claims contained in the Hindenburg report fail to account for important facts and are not supported by evidence,” the U.S. regulator said in an official statement.
As a result, the stock quickly recovered and continued to rise, doubling in value since the attack. The “investigators,” meanwhile, suffered losses, failing to profit from their scheme.
The Fall of Hindenburg
After the Freedom Holding’s case, both analytical firms survived for only about another year and managed to publish several more bearish reports with mixed results. But soon an investigation was launched against Citron’s founder, and Nathan Anderson himself was accused by peers in the industry of plagiarizing ideas. Hindenburg’s final report focused on Arizona auto retailer Carvana, and shortly thereafter a farewell post appeared on the analysts’ website.
The exact reason for the closure of Anderson’s firm remains unknown — whether it was losses from unsuccessful speculations, regulatory pressure, or a general decline in Wall Street’s interest in informational attacks and skepticism toward his reports. The founder of Hindenburg Research stated that it was a logical step and that he had “worked through all the ideas”. Some experts believe the main reason was the declining quality of materials, invention of facts, and manipulation of information. After all, trust in the stock market takes years to build — but can be lost in an instant.
Also Read: Freedom Holding Corp.: Digitalization in the Fields
