Short selling is a trading strategy used as a financial term in the stock markets. In short selling, traders speculate on a stock and expect its price to fall. Short sellers are commonly referred to as short sellers. They bet on a company’s stock that they expect to fall in a certain period of time.

The short sellers profit from the decline in the company’s price. The traders use the securities from their brokers to sell them first. When the price of the security falls in the open market, they buy it back at a lower price according to their expectations to complete and exit the trade.

It is a classic high risk/high reward ratio where the trader bears the unlimited risk in case the price of the selected stock rises instead of falling. This creates a debt situation as the trader has to buy those shares at a higher price to repay the leverage.

Short selling can be done for the purposes of market speculation and hedging to offset traders’ long positions.

Any trader who enters into a short selling deal with his broker will have to pay interest on the total value of the shares borrowed for the duration of the trade. In India, all categories of investors, including retail and institutional investors, are allowed to engage in short selling, according to a framework issued by the Securities and Exchange Board of India (SEBI) on January 5, 2024.

Short selling is recognized worldwide as a trading strategy in markets with active trading in equity derivatives.

How much did Hindenburg earn?

Nathan Anderson’s Hindenburg short position in the Adani group of companies resulted in a loss of nearly $153 billion in the market value of the companies, leaving them worth just over $4 million. Bloomberg reported that the earnings figures come from the statement released by Hindenburg. mint could not independently verify the figures.

SEBI’s request to Hindenburg highlighted the presence of Kingdon Capital Management, which had access to Hindenburg two months before the original Adani report was published. Kingdon agreed to pay Hindenburg 30 percent of the profits from the Adani deals, the SEBI notice said.

Kingdon has passed on $4.1 million of the profit from the Adani short-selling deal to Hindenburg, and another $1.4 million is still outstanding, according to the capital market regulator.

Hindenburg’s latest update on the Adani-Hindenburg saga includes allegations that SEBI Chairman Madhabi Puri Buch had holdings in the offshore entities linked to the alleged money laundering case. The short seller published an update to the original report on August 10. The original Adani-Hindenburg report was published on January 24, 2023.

SEBI has responded to the short seller’s allegations, terming them “inappropriate” and pointing out that the Chairperson has made required disclosures from time to time. “The Chairperson has also recuse herself from matters involving potential conflicts of interest,” SEBI said in a recent statement issued on August 11.