The 60-year-old tycoon had reason to be buoyant: last-minute bids had helped the flagship of his ports-to-power empire close a record $2.5 billion share sale despite a searing short seller attack that triggered a stock rout. As he headed home from Tel Aviv at 6:13 p.m. local time in his Bombardier Global 6500 private jet  — a relatively-new acquisition with super-speedy wireless connectivity — the industrialist spent a lot of time in the quietest part of the flight cabin on marathon calls.

But the brutal sell off in Adani Group stocks continued on Wednesday, Feb. 1, wiping out market value of more than $80 billion in a week — despite the supposed successful conclusion to the share sale.  

Anxious investors started calling Adani’s finance team to express concerns, according to people familiar with the events who did not want to be named as the discussions were private.

Headwinds Building

One of them was the Royal Group, the parent company of Abu Dhabi’s International Holding Co., which nudged the conglomerate to reconsider Adani Enterprises Ltd.’s share sale, one of the people said. 

By Wednesday afternoon, a state-run financial institution — also one of the anchor investors in the follow-on offer — said it won’t support the group further. Earlier in the day, opposition parties had heckled the Narendra Modi government in parliament, chanting “Adani, Adani” during the union budget speech. The tycoon often tailors his corporate strategy to Modi’s nation-building priorities.

Sometime around 5 p.m. in India on Wednesday, Adani asked for an emergency board meeting to be convened in 30 minutes. The share sale was being scrapped. At 10:21 p.m. in India, the filing had hit local stock exchanges, marking a dramatic U-turn. 

In barely 19 hours, India’s biggest ever follow-on share sale had gone from being a done deal to a dud. 

Representatives for Royal Group, IHC and Adani Group didn’t immediately respond to written requests for comment outside of office hours.`

Protecting Relationships

Adani chose to forgo the short-term victory of nailing the follow-on offer to protect his longer-term relationships with marquee investors who otherwise were staring at some embarrassing mark-to-market losses on the sums they had committed. 

And in that one fell swoop, the US-based short seller Hindenburg Research, which had published a scathing report on Jan. 24, claimed its biggest casualty yet. 

In its explosive broadside, Hindenburg had accused Adani’s conglomerate of “brazen” fraud and years of stock market manipulation, money laundering, as well as other alleged crimes that it labeled as “the largest con in corporate history.” 

Adani Group hit back saying the report was “bogus,” “maliciously mischievous” and threatened legal action.

In its 413-page Sunday rebuttal, it called Hindenburg’s report and its short bet a “calculated securities fraud” as well as an attack on India and its institutions.

Three days later, its share sale had unraveled amid the fracas.

Dejected Attendees

One dejected attendee of Adani’s emergency Wednesday meeting said all it took was an attack from a small short seller to destroy years of hard work in just a week.

A veteran dealmaker aiding the share-sale process said he had never seen an equity offering canceled in this fashion over a nearly two-decade career. 

But the sense of relief among major investors was palpable. State-run Life Insurance Corporation of India Ltd., which is a shareholder in five Adani Group companies, deemed the decision a gesture of good corporate governance, according to people familiar.

That’s how Adani sold it, too. Addressing investors in a video early Thursday to explain the abrupt volte-face, he said: “For me, the interest of my investors is paramount and everything is secondary.” 

He added that he wanted to insulate them from losses. “Despite the volatility in the stock over the last week, your faith and belief in the company, its business and its management has been extremely reassuring and humbling, for all of us.”

The selloff, however, continued. By Friday, half of the value of the conglomerate, or more than $110 billion, had evaporated since the Hindenburg report’s release. Adani Enterprises shelved a plan to raise as much as 10 billion rupees via its first-ever public sale of bonds following a market rout, Bloomberg News reported on Saturday, citing people familiar with the matter.

The impact on India’s broader market was also huge. As of Thursday, the rupee had fallen against all its Asian peers over the period, while the spreads on an index of bonds in the nation expanded to the widest level in four weeks.

Distancing Itself

The ripple effects prompted Modi’s government — perceived to have close ties with Adani — to begin publicly addressing and distancing itself from the scandal-hit conglomerate. Although Adani’s interests from ports to energy are inextricably intertwined with the nation’s growth plans, government officials talked down its impact on the wider economy.

“It is between one private company, and the regulator and the market; It doesn’t concern the macroeconomy,” T. V. Somanathan, the nation’s finance secretary, said in an interview Thursday. “The exposure of banks, LIC to Adani is not worrying at all. I don’t see any contagion risk on this.”

The arrangers of Adani enterprise’s scrapped equity offering have had to reconcile themselves to minuscule fees and are scrambling to recover what they can from what was supposed to be a mega follow-on share sale. The bulk of the $12 million that investment banks were set to earn was contingent on the success of the deal, people with knowledge of the matter said. They’re now expecting only minimal compensation for their work on the offering.

As the turbulent week drew to a close, the embattled tycoon entered talks with creditors to prepay some loans backed by pledged shares, as some banks stopped accepting the securities of the group as collateral. 

“The dust is not yet settled,” Alok Churiwala, managing director of Mumbai-based Churiwala Securities Pvt., said on Thursday. “One has to be very watchful and investors would be well advised not to tinker with Adani stocks till there is clarity on the way forward.”

–With assistance from Ashutosh Joshi, Alisa Odenheimer, Baiju Kalesh, Archana Narayanan, Anto Antony, Ragini Saxena, Vidya Root and Subhadip Sircar.