In the midst of a market rout last week that stripped Indian conglomerate Adani Group of $65 billion in market capitalization, Adani announced that it was contemplating “remedial and punitive action” against Hindenburg Research, the short seller whose scathing Jan. 24 report sparked the sell-off.
In 2019, Justice Peter Sherwood dismissed the suit, holding that Hindenburg’s allegedly defamatory statements were statements of opinion protected by the 1st Amendment. Hindenburg had offered a disclaimer about its short position in Yangtze shares at the beginning of its report, the judge noted.
Most courts in the U.S. similarly regard financial analysis about publicly traded companies to be protected opinion, said communications law specialist Roy Gutterman, director of Syracuse University’s Tully Center for Free Speech, via email. “Courts look at the meaning of the [allegedly defamatory] statements, whether they can be proven true or false, and, most importantly, their context,” said Gutterman.
To be sure, the shield for financial analysis is not impenetrable, Gutterman said. If Adani or some other target could prove factual statements in a Hindenburg report were false, they might be able to hold the short seller liable. The short seller, in fact, is so confident about its research that last August, it filed its own defamation suit against a biopharmaceutical company that pushed back after a Hindenburg research report asserting that an inventor with close ties to the company was “a lifelong con artist.”
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