The pharmaceutical group Grifols has asked the New York courts for a jury to judge the alleged crimes that it attributes to the vulture fund Gotham City Research and its directors, for the dissemination of a report in which they accused it of falsifying its accounts and that has caused a collapse of 32% of its shares on the stock market.
According to the lawsuit, filed on Friday in the Southern District Court of New York, to which La Vanguardia has had access, Grifols accuses Gotham City Research and its top executive, Daniel Yu, of libel, slander and defamation and of unlawful interference in business relationships. The British financier Cyrus de Weck, and the hedge fund through which he operates, General Industrial Partners, are accused of cooperating and instigating these crimes. The lawsuit can be extended to other people or companies if the ongoing investigations identify new actors, and accuses all of them of unjust enrichment, at the expense of the damage that their report has caused to Grifols, its managers, workers and shareholders, so asks for compensation for damages “in the amount to be determined by the court.”
Grifols’ lawyers are very harsh with the directors of Gotham and GIP, whom they describe as “predators”, “scammers and criminals”, and include in the lawsuit an investigation into Daniel Yu’s criminal past and Gotham’s current problems. , with the authorities of the State of Delaware and with the United States Department of Justice (equivalent to the prosecutor’s office), which he claims is investigating him for possible abusive practices in the American stock market.
According to the lawsuit, Grifols is not questioning Gotham’s short selling of shares, but rather the preparation and dissemination of the report “which the defendants did as part of a malicious plan to short sell and distort” the company’s image. , to “manipulate the market illegally”, “create panic and cause a free fall in the price of the shares”, which effectively reached 43%.
The American law firm Proskauer, which filed the lawsuit, considers that Gotham and his collaborators began to build a short position in Grifols in the spring of 2023, but in the following months the stock rose more than 60%, causing them heavy losses. For this reason, and faced with the fear of a “short squeeze” that would have ruined bearish investors, they prepared and published the report, “built on lies,” and communications on social networks, in which they claimed that the company was “not suitable for investment” and its value was zero.
“The very rush of the defendants to seize their ill-gotten gains already shows that the Gotham Report is based on lies,” and in fact “the defendants chose to profit from their short position just before Grifols made its first public response.” ” given that “the defendants know that the Gotham Report is based on falsehoods and that, once the panic in the market subsides and the lies are debunked, stocks will rise again.”
One of the key points highlighted in the lawsuit is that Gotham changed its report one day after causing the stock to collapse, without telling anyone, and stopped accusing the company of hiding a $95 million loan it had granted to Scranton. , an investment company linked to the founding family. With this change, the lawsuit states, “the defendants admit that the report they published was false” and their malicious intent is evident by not making their rectification public. In fact, the lawsuit recalls, the loan is in the accounts sent to the SEC and the CNMV in the last five years.
The lawsuit recalls that Grifols from 2003 to 2020 was audited by KPMG, also by Grant Thornton since 2017 and in the last two years by Deloitte and that the financial documentation has been reviewed by both the SEC (the US stock market regulator) and by the CNMV, without detecting any irregularities.
In addition, he assures, the group has issued bonds in 2017, 2019 and 2021, subscribed by American banks and other countries, which have carried out their own “due diligence” on Grifols’ financial situation through other independent auditors to cover themselves against possible claims from investors to whom the bonds will be resold.
In the lawsuit, Grifols does not quantify the amount it claims from the defendants, which in its opinion should include the financial and reputational damage, the profit that the fund has obtained in its operations, the legal costs and a “punishment cost” on the defendants “in a quantity sufficient to prevent further misconduct.” In fact, after the publication of the report, the company’s bearish positions on the stock market have skyrocketed.
To calculate the financial costs, the lawsuit recalls that the group’s market capitalization is 3,000 million lower than the days prior to the publication of the report. Reputational damage, on the other hand, is assessed as “irreparable.” In his opinion, the reparation would have to include the additional financial costs that Grifols could incur “if financial entities refuse to grant it loans and other lines of credit or only if it agrees to pay higher interest rates.”
Grifols also asks the court to apply “precautionary measures so that the defendants retract and do not persist in their actions” with the publication of new reports.