The shares of the blood products manufacturer Grifols have fallen by up to 50% this morning on the stock market after the bearish hedge fund Gotham City Research published a report accusing it of hiding its real debt and concealing its accounts, which leads it to give a zero value to your shares.
In a very volatile opening, the shares have fallen to 7.41 euros, breaking the lows of the last ten years, to subsequently rise 38% from those levels. At midday it was trading at 10.39 euros, with a drop of 27% compared to Monday’s close.
Grifols rejected the accusations in a document sent to the National Securities Market Commission (CNMV), which described the report as “false information and speculation.” “As a company committed to transparency, integrity and ethical conduct, we categorically deny and reject any accusation of accounting practices or erroneous information in our consolidated financial statements,” Grifols points out. “We have always maintained and will maintain strict standards in our accounting reporting,” with “transparent and ethical conduct,” he added.
The company is audited by KPMG and Grifols recalls that its auditors “have systematically issued audit reports without qualifications.” The CNMV assured for its part that it is analyzing Gotham’s report and that it is in contact with Grifols, from whom it will collect “the necessary data” to clarify his doubts.
Gotham specializes in short-selling operations, which make a profit from the drop in the value of the shares that they cause with their reports. Gotham City, which uncovered Gowex’s accounting fraud in 2014 with a similar report, maintains that Grifols “manipulates” its reported debt and ebitda (earnings before interest, taxes, depreciation and amortization).
At the center of the report is Grifols’ relationship with Scranton, a company through which the Grifols family channels part of its 8.4% stake in the company. Thus Gotham points out that the group consolidates profits from two companies, BPC and Haema, which it does not control but are owned by the family.
If the profits of these two firms were not included, Gotham points out, Grifols’ leverage would be 9.6 times its EBITDA compared to the 6.7 times declared by the company, since its profits would be overestimated by at least 32%. .
The Gotham report also indicates that Grifols lent Scranton 95 million in 2018, to buy BPC and Haema, and has not included that loan in its accounts, although it is in Scranton’s. Regarding this firm, he points out, its real debt would be between 27 and 31 times the EBITDA, which implies that “it is highly leveraged.” Gotham also questions the high price paid by the company for some of the acquired companies.
Gotham also questions the role of the group’s new CEO, Thomas Glanzmann. According to the firm, “the president is being hailed as a change of direction, but he has been at Grifols since 2006 and on the board when the suspicious transactions we described in our report occurred. We found it in a position of conflict and a Grifols in everything except the name.”
