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.

If Adani is talking about a lawsuit in the U.S., I’ll believe it when I see it.

Based on my search of federal district court and New York State Supreme Court records – and despite some tough talk from Hindenburg targets such as Nikola Inc — it appears that only two of the 20 or so companies that Hindenburg has attacked in research reports issued since 2017 have actually sued the short seller for defamation.

And both of those lawsuits — one by China-based real estate developer Yangtze River Port and Logistics Ltd; the other by Bollywood film producer Eros International Plc — were tossed in 2019.

It’s worth looking at the short-lived Yangtze River case to understand why Adani (and other Hindenburg targets) should think twice about suing Hindenburg in the U.S.

Hindenburg blasted Yangtze River in a 2018 report that described the NASDAQ-listed company as a “shell” and a “scheme” that served only to transfer money from U.S. investors to Yangtze’s chairman and controlling shareholder. Yangtze sued Hindenburg, founder Nathan Anderson and a sister company, ClaritySpring Inc, for defamation in New York State Supreme Court in Manhattan, where Hindenburg is based.

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. The short seller also repeatedly hedged its accusations with words like “we think” and “we believe,” Sherwood said, and noted throughout the report that its views were based on public documents that Hindenburg hyperlinked.

“Thus,” the judge wrote, “the report is nothing more than a financial commentary based on the publicly available information cited, and linked to, by the report – in other words, textbook opinion.”

Yangtze’s lawyer from Sichenzia Ross Ference did not respond to my query. Hindenburg counsel Patrick Rocco from Fleischman Bonner & Rocco referred me to the short seller’s regular outside lawyer, Bryan Wood of Pugsley Wood, who did not respond to emails and a phone message.

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. “The context of financial analysis of companies, particularly, publicly traded companies, tends to be pure opinion,” he added.

The Eros case naming Hindenburg, Anderson and ClaritySpring is another example. Eros' lawsuit was more complicated than the Yangtze River case, but the outcome was the same. The company alleged that several short sellers, including ClaritySpring, had conspired to drive down its share price. Eros claimed that Hindenburg Research was actually created by the conspirators to serve as a persona to spread misinformation about the Indian film company.

New York State Supreme Court Justice Joel Cohen found that all of the short sellers’ assertions, in articles, reports and online posts, were protected opinion. “Many of the articles at issue here were posted on online forums that generally traffic in sharing financial opinions,” Cohen wrote. “A reasonable reader,” he said, “would understand that they were sharing opinions about Eros based on news about the company.”

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.

“But proving falsity of fact might be a difficult task in a case like this,” Gutterman said. “Threatening a libel case and winning a libel case are worlds apart.”

Hindenburg didn’t respond to my email query, but said in a statement last week that any action by Adani would be meritless and that it would welcome to opportunity to obtain discovery from the Indian company in U.S. litigation.

Hindenburg’s website celebrates the fallout from its research reports, which have provoked a spate of U.S. regulatory investigations and shareholder class actions. Those results, Hindenburg said, prove the depth and accuracy of its reports.

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.”

After the report came out, the company, Enochian Biosciences Inc, issued a shareholder letter claiming that Hindenburg had misrepresented some of its communications with company officials about a Turkish criminal proceeding against the inventor.

Hindenburg sued, alleging that Enochian's factual false accusations, which were also filed with the U.S. Securities and Exchange Commission, had wrongly besmirched Hindenburg’s “well-deserved reputation for thoroughness, precision and accuracy.”

The tactic worked: Several weeks after the short seller brought its complaint in federal court in Manhattan, Enochian revised the SEC-filed shareholder letter to remove criticism of Hindenburg, which then dropped the suit. (Enochian counsel Clayton Parker of K&L Gates declined to comment on the case.)

Adani, which has called the Hindenburg report “maliciously mischievous unresearched” did not specify in its threat of legal action last week whether it is contemplating a suit in the U.S. or in India.

But based on Hindenburg's litigation on the U.S., I'd say India is probably a better bet.