The Waiting: The patience of Nate Anderson
It's the end of an era, too short in my opinion, when diligent work on fraud and corporate governance failings could get big results.
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
Ernest Hemingway, The Sun Also Rises
Nate Anderson, scion of iconic Hindenburg Research, is not bankrupt, but he and his team certainly contributed to the bankruptcy and ruin of many in the last several years.
He is tired, he says, and has decided to hang up his spikes.
BY Amanda Gerut January 16, 2025 at 3:13 AM EST
Hindenburg Research—the short seller whose investigations spawned fraud charges against 65 people, criminal indictments against 24 individuals, and foreign sanctions and fraud charges against 7 others—is disbanding.
One of Wall Street’s most feared short sellers, Hindenburg Research is winding down its operations after years of investigating accounting irregularities, undisclosed deals and conflicts of interest, and illegal and unethical business conduct. All told, Hindenburg’s published reports partly led to regulators accusing nearly 100 people of civil or criminal allegations.
Nate Anderson, who founded the forensic financial research firm six years ago, wrote a note on Wednesday explaining that the time had come to hang up the shingle. According to Anderson, he was at the point where he would wake up in the middle of the night thinking about work or the general pressure of everything. He described the labor at Hindenburg as “rather intense, and at times, all-encompassing.”
Accounting fraud is a tough short thesis nowadays. That’s because no one gives a flying tomato!
I think that's why you see few activist short reports going all-in on accounting fraud as a thesis, expecting the company to go to zero on the basis of being uncovered as a complete financial fraud alone.
Some big bets in that regard broke some of them: Herbalife, Valeant, and now Tesla.
There are exceptions, such as Hindenburg's call on Tingo. Winner, winner, jollof rice with chicken dinner!
As a result, there are typically only a smattering of accounting fraud allegations in the average activist short report. It's just there for spice. The activist short report typically focuses on governance and other business strategy and structure issues that will cast doubt on the market's valuation of the company and/or the company's liquidity and is bolstered by questions about credibility of the company's disclosures and its management.
That's why allegations regarding undisclosed related party transactions are so powerful. They were the undoing of Adani, since they suggested corruption and self-dealing.
I wrote, in December 2020, that Jay Clayton went out with a bang by settling a long-awaited enforcement action against GE. But it was less than satisfying to me:
Professor Jena Martin of West Virginia University College of Law explains what’s going on here in her recent paper, “Changing the Rules of the Game: Beyond a Disclosure Framework for Securities Regulation.”
“Under this model, many of the SEC's biggest corporate scandals in the last 20 years — ones that precipitated hundreds of millions of dollars in losses to the markets and investors — would have been perfectly legal if the company had disclosed what it was doing. To be clear, the company could have still engaged in the underlying practice, they just needed to tell the general public about it.”
I've written about Hindenburg's many successes, as recently as last week. I did not know the Carvana report was Hindenburg's last.
Just look at this track record! This chart is from LiveMint, as of August this year.
I wrote last week, about the Carvana report:
There is a lot here, and you can sort it out for yourself, if interested. It is put together in the tediously detailed way Hindenburg is famous for — and that has contributed to its success — and the firm gives thanks to many sources along the way.
How hard is it to get people to react to even serious accounting and governance failings in this environment? Carvana is up quite a bit since the report was published January 2.
More about some of the winning cases can be found in these newsletter editions.
A rollercoaster ride for Lordstown Motors this week, but its executives are ok
Been caught stealin': Hindenburg Research is on a roll with Adani and Block (Square) short reports
Zeke Faux talks "Number Go Up" at the Pen & Pencil Club
McKenna gets the last word on Adani’s many auditors
© Francine McKenna, The Digging Company LLC, 2025
So true. The world has changed and not for the better. I remember when accountants and auditors were supposed to be the scorekeepers and referees. Now, both are cheerleaders unwilling to be a backstop against aggressive accounting (at best) and malfeasance (at worst). Investors have been left to fend for themselves. Both have become a commodity with the march toward the lowest, rankest possible level of service. Sooner or later, we all will pay the price.