The shares of the Spanish pharmaceutical company Grifols sank more than 42% this Tuesday after Gotham City Research, the American bearish firm that brought down Gowex in 2014 with a devastating analysis of its accounts, has published a report in which it accuses the Catalan multinational to manipulate its financial statements and ensure that its shares are worth “zero.”

According to Gotham City, Grifols “manipulates its reported debt and Ebitda [beneficio bruto operativo] to artificially reduce its leverage.” The US fund maintains that this magnitude “is closer” to being 10-13 times its EBITDA than the 6 times published by the company. Grifols “categorically” denies the accusations.

After the publication of the report, the group’s shares, weighed down by a volatility auction in the early stages of trading this Tuesday, fell 30.56%, to 9.88 euros per share, although without being able to cross operations. Spanish Stock Exchanges and Markets (BME) has inhibited its listing, which did not set a price and has remained in a liquidity auction, “once the value has been strangled upon reaching the maximum range,” explained a spokeswoman. That range has been expanded first to 30% and then to 50%. After an hour and a half of trading, Grifols shares began trading with a drop of more than 42%.

A few minutes earlier, Grifols sent a statement to the National Securities Market Commission (CNMV) in which it rejects “the recent false information and speculation published by Gotham City Research in relation to the company’s accounting and financial information.”

“As a company committed to transparency, integrity and ethical conduct, we categorically deny and reject any allegations of erroneous accounting practices or misreporting of our consolidated financial statements.”

Just before the publication of this report, the British company that owns Gotham City, General Industrial Partners LLP, emerged this Monday with a short position of 0.57% in Grifols’ capital, according to CNMV records. Going short means betting on the fall of a value, which is precisely what is happening with Grifols.

Gotham claims in its 65-page report that both the Catalan multinational and Scranton Enterprises, the holding company of the Grifols family, its largest shareholders, improperly consolidate two companies in their accounts, BPC and Haema, “despite owning 0% of each company.” These two companies, he maintains, represent approximately 40% of the profits from minority stakes in Grifols. “This treatment is materially misleading and incorrect,” the hedge fund says. That source of profits has gone from having no weight in 2017 to accounting for 100% of profits in 2023, according to Gotham.

“If our estimate of Grifols’ true leverage were correct, Grifols would face significantly higher financing costs. Consequently, we believe that the shares are not investable, and are probably worth zero,” they say.

Grifols states in the note sent to the CNMV that “as a listed company, it fully reports and discloses all relevant information related to all its significant transactions with the highest level of integrity and transparency to reflect an accurate and fair view of the consolidated financial statements of Grifols”.

“Robust” controls

“The transactions with related parties and disclosures reported by Gotham City Research have been fully disclosed and audited since 2018 and reported to the Spanish regulator,” adds the multinational.

“Grifols’ consolidated financial statements and internal controls over financial reporting are robust and are subject to periodic and rigorous annual audits. These annual audits are performed by one of the Big Four auditing firms, which has consistently issued unqualified audit reports.” Grifols’ auditor is the multinational KPMG. This firm has been supervising its consolidated accounts uninterruptedly for more than 32 years, without including any qualifications in recent years.

In its note to the CNMV, Grifols points out that “as a world-leading company in the healthcare sector, we have the unwavering commitment to maintaining the highest level of business and financial integrity. Corporate governance is and remains our top priority. We have always maintained and will maintain high standards in our accounting reporting and are fully committed to transparent and ethical conduct in all of our business practices.”

Gotham has published its report after on Monday night, after the market closed in the United States, it announced on Twitter that it was finalizing the publication of an analysis on a large Spanish company that it did not identify, but of which it said that It is worth more than 10 billion dollars.

“Tomorrow, we will publish a report on a highly leveraged company, valued at more than $10 billion.” [9.000 millones de euros al cambio]. The shares are listed in Spain. Although the company’s actions remind us more of NMC Health than Let’s Gowex, we believe that the shares are not investable, and their value will go to zero, just as Gowex’s did,” Gotham said.

NMC Health is the holding company that operates the largest chain of private hospitals in the United Arab Emirates. The U.K.’s Financial Conduct Authority (FCA) concluded in November that NMC Health had misled the market about its debt and failed to properly report related-party transactions, in what turned out to be a case of market abuse and manipulation.

After last night’s announcement by Gotha City, given the rumors about the possible offensive of this firm against a Spanish company, Grifols shares listed on the New York Stock Exchange (known as ADR) have already fallen by 6%.

Specialized in blood products, the Spanish pharmaceutical company is a leading multinational in its sector based in Barcelona that was founded in 1909. On December 19, its former president Víctor Grifols Roura, grandson of the founder and architect of the company’s transformation into a multinational leader in the plasma industry, was leaving his position on the board of directors, in which he had been for 40 years.

Víctor Grifols, who remains honorary president, was CEO of Grifols until 2017 and non-executive president until 2022, when he left office to calm the markets in the face of a stock price crisis that brought its value to a minimum.

In its report, Gotham notes that Grifols CEO Thomas Glanzmann, appointed in 2023, “is being hailed as a change of direction, but he has been with Grifols since 2006 and on the board when the suspicious transactions we describe in our report. We find it very conflictive and a Grifols in everything except the name.”

With more than 22,000 employees and a capitalization at the close of this Monday of around 6,000 million euros, Grifols is a company of a much larger size than Gowex. The Catalan multinational, which plans to present its 2023 results in February, obtained a net profit of 3.3 million until September, compared to losses of 56 million at the end of the first half, after increasing its income by 11.7%, to 4,882 million.

With a significant presence in the United States, the group then had a net financial debt of more than 9.5 billion. This magnitude, recorded according to Gotham in an “opaque and incomplete” manner in its third quarter results, has multiplied by four since 2012 due to the acquisitions that the company has carried out in recent years.

Grifols’ figures are much more relevant than those of Gowex, dedicated to installing free Wi-Fi in large cities and means of transport, and which in its best moments was worth 2,000 million in the stock market for SMEs, known then as MAB, and with fewer controls than the Ibex.

The founder of Gowex, Jenaro García, is awaiting trial after admitting to the accounting fraud that Gotham City Research uncovered ten years ago, in a report that denounced that more than 90% of the profits it published were “suspicious” and that its shares were worth “0 euros”, instead of the almost 20 at which they were trading the previous session. Gowex had EY as a registered advisor.

Gotham City is a speculative investment firm famous for due diligence that has published in recent years on listed companies such as Gowex itself, the German special situations fund Aurelius, the British consulting firm Quindell or the digital marketing firm Criteo.

Its latest victim so far had been the French labeling company SES Imagotag, which last summer plummeted 60% the day Gotham accused management of accounting irregularities. Although it has rallied since then, it is currently still trading 23% below its pre-report level.


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