With the name of Hindenburg coming in the headlines, the discussion about another thing increases, namely ‘Short Selling’, yes, through this the American firm Hindenburg earns big money. Although, Short Selling is only a kind of trading or investment strategy, but by weaponizing it, companies like Hindenburg print billions of rupees. The special thing is that the entire game of short selling is played with the shares borrowed by the short seller. Let us know step-by-step about the whole game of short selling…
Hindenburg had earned crores of rupees last year
First of all, let us tell you that Nathan Anderson’s Hindenburg Research is not only an investment firm but also a short seller company. As its name makes clear, it earns money through short selling. If we look at the profile of Hindenburg company, it is an activist short seller and this is also an important source of its earning billions of rupees. According to a report, when Hindenburg released its report on Adani Group in January last year, on one hand a tsunami was seen in Adani Stocks, but on the other hand Hindenburg printed about 4 million dollars or about Rs 33.58 crore. Were inserted.
However, this time there does not seem to be any significant impact on Adani’s shares. It is worth noting that the new report that Hindenburg has now released regarding SEBI, also has a connection somewhere with the huge earnings made by shorting shares last year. Market regulator SEBI had issued a show cause notice to Hindenburg regarding the same earnings. Hindenburg did not give an official reply to that notice, but now issued a report regarding SEBI only.
Understand earning from short selling in simple language
Short Selling is actually a strategy in which you sell a security which you do not even own. Rather, this entire game is played through borrowed shares. The special thing in this is that those trading in short selling earn when the price of stocks falls instead of rising.
Let us explain with an example, if a short seller buys the shares of a company with the hope that the stock worth Rs 200 will fall to Rs 100 in the future. In this hope, he takes shares of this company as loan from other brokers. After doing this, the short seller sells these borrowed shares to other investors who are ready to buy them at the price of Rs 200 only. At the same time, when as expected, the company’s shares fall to Rs 100, then the short seller buys shares from the same investors. In times of decline, he buys the share at the price of Rs 100 and returns it to the person from whom he had borrowed it. According to this, he makes a huge profit of Rs 100 per share. Under this strategy, Hindenburg earns money by shorting companies.
There are more risks in this game along with benefits.
As mentioned, in Short Selling, money is earned by shorting the shares. But apart from earning huge profits, this method is also risky and if the bet backfires, the short seller has to suffer huge losses. This method is considered bad for the health of the market. In fact, if investors lose money by investing in this way, then there is a chance for them to stay away from the market, which also affects the market growth.