After a period of sluggish activity in 2022, short selling saw a slight uplift in 2023, with an 8% increase in the number of campaigns recorded over the year.

According to Diligent Market Intelligence (DMI) Activist Shorts data, 106 campaigns were advanced globally in 2023, compared to 98 in 2022.

In line with 2022, the technology sector proved to be the most attractive sector for short sellers in the period, with 28 campaigns launched. Industrials was the second most favored sector with 20 campaigns launched, an almost doubling of the number advanced in 2022. The financial services sector attracted the third highest number of campaigns at 14, a near three-fold increase when compared to 2022.

Below, DMI takes a look at four of the more notable activist short campaigns from the last 12 months:

Hindenburg versus Adani Enterprises

In one of the first major short attacks of the year, Hindenburg Research targeted the Adani Group with claims the conglomerate, which is involved in port operations and development in India, had engaged in market manipulation and accounting fraud. The January 24 report, a result of a two-year investigation, triggered a share price plunge for seven listed companies tied to Adani. At the time, Gautam Adani, the founder and chairman of the Adani Group, was cited to have amassed a net worth of roughly $120 billion.

Adani was prompt in its rebuttal of the allegations, stating in a next-day release that the claims were a “malicious combination of selective misinformation and stale, baseless and discredited allegations.”

However, Adani cancelled a planned 200-billion-rupee ($2.4-billion) share sale due to the resultant stock volatility and the Securities and Exchange Board of India (SEBI) unveiled an investigation into potential violations of Indian securities laws and any conflict of interest. In January, India’s Supreme Court ruled against escalating the investigation, finding no grounds to transfer the probe to another law enforcement agency.

According to DMI’s Shorts data, Hindenburg’s campaign at Adani recorded one-week follower returns of 15.82%, with one-month returns of 59.12%. Adani’s stock price had dropped by 65.3% by February 27, and at year end was around 17% below its January 23 pre-short level.

Hindenburg versus Icahn Enterprises

Hindenburg subsequently turned its attention to Carl Icahn’s namesake conglomerate, Icahn Enterprises, which operates a range of auto, energy, metals, railcar, gaming, food packaging, real estate and home fashion subsidiaries.

The May 2 report argued that shares in the investment company were inflated by more than 75% relative to its underlying assets and that it would likely have to eliminate its dividend, driving the stock down by over 25% over the following two days.

Icahn Enterprises on May 4 reassured investors that the market disruption did not affect its liquidity. It issued a more comprehensive statement on May 10, stating that it prioritized liquidity and long-term distributions, and that the premium to the net asset value (NAV) was due to its unique structure. The stock was again impacted on August 3, falling by just under 30%, when Icahn cut its quarterly dividend in half.

Hindenburg recorded one-week campaign returns of 5.92% in the campaign and one-month returns of 45.96%, according to DMI’s Shorts data.

Viceroy versus Medical Properties Trust

On January 26, Viceroy Research published a report with claims that real estate investment trust Medical Properties Trust (MPT) had engaged in uncommercial transactions with its tenants, had high credit risk and would have to cut dividends, putting a downside target on the stock of up to 75%.

In early February, Viceroy proceeded to present three case studies on the Alabama-based REIT’s alleged “pervasive revenue round tripping, uncommercial transactions and fake asset values.” By February 9, MPT’s stock had dropped by 5%.

In late March, Medical Properties Trust announced a lawsuit against the short outfit over what it described as “baseless allegations to drive down the company’s stock price.”

“Since our founding, MPT’s primary objective has been to profitably invest in hospital real estate and create attractive returns for our shareholders. We are proud that we have avoided distractions and maintained a relentless focus on that objective to deliver enduring results,” a March 30 letter issued to shareholders read.

“[MPT] has been a real battle,” Viceroy co-founder Gabriel Bernarde told DMI in an interview. “We’re actually in the midst of litigation with them right now, but this isn’t our first rodeo.”

Viceroy’s campaign recorded returns of negative 2.54% in the first week, increasing to 17.73% in the first month, according to DMI’s Shorts data.

Muddy Waters Research versus Sunrun

After running a brief campaign in 2022, Muddy Waters returned to short residential solar energy systems maker Sunrun on October 25.

The short seller argued that Sunrun’s purported 724,784 subscribers as of June 30 was far removed from the U.S. Energy Information Administration’s (EIA) sales data, which are required to be submitted each month by third-party owners of solar photovoltaics. Muddy Waters suggested that the company had reported subscribers 20.9% higher than EIA data.

Muddy Waters argued that Sunrun had been claiming and selling investment tax credits on the inflated numbers, with the amount of possible excess tax credits for 2022 alone cited as potentially around $200 million. The stock had dropped by 10.5% in pre-market trading on October 25.

In a same-day response, Sunrun argued that the EIA’s figures were not comparable to its own for a number of reasons, including that its count is based on installations whereas EIA data are based on assets already in operation. The company also argued that the EIA data have “no bearing on tax credit determinations.” On the morning of October 26, Sunrun’s stock had returned to its pre-short report levels.

Muddy Waters issued a follow-up report responding to Sunrun’s defense on November 1, doubling down on its claim that the company’s subscriber numbers are “arbitrary, if not an outright falsehood.”

According to DMI Shorts data, Muddy Water’s recorded 2.33% one-week returns on the campaign, with one-month returns of negative 15.49%.