Gotham City Research, the vulture fund promoted by Daniel Yu, has returned to the charge this morning against Grifols, after publishing a report on January 9 in which it accused it of accounting falsehood. The new report has had an immediate impact on the share price, but much less than its authors intended. The company fell by 7% (compared to the 40% that caused its first attack), but recovered quickly, and at midday the price stood at 10.68 euros, the same price as last week, and with a decrease 2.6% compared to Monday's price.
In a communication to the CNMV, Grifols has “categorically” rejected the report, which it describes as “malicious, false and misleading insinuations from Gotham that have the sole objective of destabilizing Grifols and generating doubts among institutional investors.”
The fund, sued in the United States for libel by the pharmaceutical company, does not now accuse it, but rather raises seven “questions” about its relationship with Scranton Enterprises, the investment holding company that counts among its shareholders several members of the Grifols family. . The pharmaceutical company reiterates to the CNMV that it “continues with its lawsuit against Gotham” and is providing the different authorities with the information they have requested about the case.
Gotham recognizes that some of its “questions” are based on articles published in the Spanish press. In his opinion, the changes in its governance that Grifols has introduced, with the separation of the family from executive positions, "indicate to us that at least some of our concerns were valid."
The report recognizes that once again Gotham and its allies, including the GIP fund also sued by Grifols in New York, have short positions in the company, that is, they benefit by causing the stock to fall.
All the operations that Gotham questions in its document, just over a page long, are already in its previous report, and the hedge fund considers that they have not been clarified by the pharmaceutical company. However, the fund now introduces two new questions, which it recognizes are based on information published in the Spanish press: it asks the percentage of participation of the Grifols family in Scranton Entreprises and questions the work that the group has entrusted to the Baker McKenzie law firm.
Thus, it points out that “Grifols' audit committee hired Baker McKenzie to perform an “independent analysis” of Grifols' business and accounting practices. Baker McKenzie is a law firm, not a forensic accounting firm. “Is Grifols willing to hire an independent forensic accounting firm to investigate its business and accounting practices and make those conclusions public?”
Gotham questions, as it did in its previous report, that both Grifols and Scranton consolidate the companies Haema and BPC, owners of plasma centers, in their financial results. The firm also points to two loans from Grifols to “related parties”, for more than 160 million euros, as well as “financial assets with related parties” that Grifols places at 321 million euros that it considers could have been directed to Scranton, and ask the group to confirm or deny whether that relationship exists.
Gotham's report did not surprise the markets: the firm usually issues two reports in its bearish attacks. It was surprising, however, that it did not provide any new information and even referred to press information. “Gotham City is starting to make a bit of a fool out of Grifols,” said one analyst.
Grifols shares led the rises of the Ibex 35 yesterday, with a rise of 3.44%, to 10.97 euros, and accumulated a rise of 35.4% since the initial attack by the vulture fund, which surely triggered the losses of bearish funds, like Gotham itself.
Investors had priced upward the announcements made by the company last week: the CNMC's authorization of the sale of its subsidiary Shanghai Raas, and the good results of a clinical trial of fibrinogen, a drug from its German subsidiary Biotest that opens the doors to request its approval by the FDA.
