Did Hindenburg pay just $300 as tax for short selling?

US DoJ investigates short-selling practices, including by Hindenburg in the Tecnoglass case.

- ABHINANDAN MISHRA

On 9 December 2021, Hindenburg Research published a shortseller report on Tecnoglass, a Colombia-based glass manufacturing company. The said sensational report was named “Cocaine cartel connections, undisclosed family deals, and accounting irregularities all in one Nasdaq SPAC.”

After the publication of the report, which raised red flags about Tecnoglass’ alleged links with criminal network and related governance issues, the price of Tecnoglass shares slipped by over 40%. From $31.77 it went down to $18.67 after the “report” was published. It lost nearly $1 billion that day.

Almost three and a half years later, it is now trading at the New York Stock Exchange at $58, three times of what it was when the said report had come out. In November 2023, Forbes named Tecnoglass as the number 1 US small-cap company.

Following the Hindenburg allegations, which failed to cause the expected dramatic downfall of the company, the US Department of Justice (DoJ) initiated a comprehensive criminal investigation into this practice of short selling.

This probe, managed by the department’s fraud section in conjunction with federal prosecutors in Los Angeles, centred on the practice of short selling by hedge funds and research firms. It was also asked to examine their interconnected relationships and improper trade coordination or illegal activities intended to generate profits.

The DoJ was mandated to look at how hedge funds accessed research and established their positions, particularly in relation to reports that influence stock prices. It also was asked to probe if money managers manipulated stock prices or engaged in abuses such as insider trading, engaged in deceptive practices, including misleading the public about the funding of seemingly independent research, and orchestrated stock drops to induce panic among shareholders and drive further selling.