The manufacturer of hemoderivats Grifols announced yesterday to the CNMV that it will take legal action against Gotham City Research, the vulture fund that caused its fall on the stock market on Tuesday by accusing it of falsifying its accounts. This fund, for its part, surprised everyone yesterday by announcing to the regulator its withdrawal: on the same Tuesday it bought back the shares of Grifols that it had sold short, with which it had pocketed in a single day a profit that could reach the 25 million euros.
In a communication to the regulator, the third since the American firm published its report, Grifols announced yesterday that the board had unanimously ratified the operations questioned by Gotham and the actions of its president, Thomas Glanzmann. Likewise, the company explained that “it will take legal action against Gotham City Research for the significant harm caused, both financial and reputational, to society, as well as to all stakeholders, and for causing great concern to patients and donors” .
One of the group’s advisors, Tomás Dagà, founding partner of the Osborne law firm
Grifols shares experienced another volatile session yesterday after the black day on Tuesday: they started with a rise of 5%, by mid-morning they were down 4% and closed with a rise of 12.27 %, up to 11,845 euros. Since the report was released, stocks have risen 65%, although they are still 16.8% below Monday’s close.
Grifols already announced to the staff on Tuesday, in an internal statement, the readiness to take measures against Gotham. “Be assured that we will do what is necessary to protect the reputation of Grifols and ensure that the reality of the facts prevails.”
The firm also has few options to avoid a long legal battle. On Tuesday itself, after the Gotham allegations were disclosed, several U.S. law firms specializing in class-action lawsuits had already published ads urging retail investors to consider themselves harmed by wrongdoing by the company’s management that they contact them to undertake collective demands.
Holzer
Yesterday, Grifols rejected again before the CNMV the alleged irregularities attributed to it in the report, and announced that today it will hold a conference with analysts to replicate the “false information” about the firm.
The credibility of Gotham’s allegations took a heavy hit yesterday after the hasty withdrawal of its bearish bet became known. The company, which on Monday announced a short position of 0.57% in shares of the Catalan company, reported yesterday that it had reduced it to just 0.06% by buying Grifols shares on the same Tuesday, in full fall. At Tuesday’s low prices, Gotham had accumulated a profit of 25 million euros on the operation.
“How little conviction in the conclusions of his own investigation”, highlighted yesterday financial sources, who recalled that the report valued Grifols shares at zero euros, and Gotham would have bought them on Tuesday at prices close to ten.
Along with Gotham’s short position, which it held through the General Industrial Partners fund and which it reduced to 0.06% yesterday, it has also closed the short position of Ako Capital, another hedge fund that had opened it more than ‘one year.
Gotham has been sued other times by victims of the reports and was convicted in 2015 of libel over allegations leveled against British firm Quindell. Criteo, a French company that was also a victim of the attacks, sued it, in this case without getting a conviction, but the American fund stopped publishing information about the company and after two years it even recommended buying it the shares, at a price ten times higher than what he had set in the first report.
In general, judges are reluctant to condemn these practices, which are often framed in the right to freedom of expression. The affected companies have also asked regulators to act on what they consider to be stock market manipulation: the fund issues the report after having short-sold the stock, to profit from the fall. In the United States, where these practices are more common, the SEC, however, does not act, unless it is shown that there is an attempt to defraud the publication of the report.
Grifols already pointed out to the CNMV on Tuesday that he “did not understand” the interpretation that Gotham’s report made of his accounting statements, endorsed by the audits, “unless the only thing he intends, as a short-term fund, is to lower the share price, as they themselves reflect on page 2 of the report, to make a profit”.
