The pharmaceutical group Grifols has asked a New York court for a jury to try the alleged crimes it attributes to the vulture fund Gotham City Research and its managers for the dissemination of a report in which they accused it of falsifying the accounts and which has caused a 32% drop in shares on the stock market. The group is asking all of them for multimillion-dollar damages.
According to the suit, presented 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 manager, Daniel Yu, of libel, insults and defamation and unlawful interference in commercial relations. The British financier Cyrus de Weck, and the hedge fund through which he operates, General Industrial Partners (GIP), accuses them of being collaborators and instigators of these crimes. The lawsuit, which can be extended to other people or companies, accuses them of unjust enrichment, at the expense of the damages that the report has caused to Grifols, its managers, workers and shareholders, so it asks for compensation for damages “in the amount to be determined by the court”.
Grifols’ lawyers call the managers of Gotham and GIP “predators”, “swindlers and criminals”. According to the suit, Grifols is not challenging Gotham’s short selling of the stock, but rather the preparation and dissemination of the report “which the defendants made as part of a malicious scheme to short sell and distort ” the company’s image, for “illegally manipulating the market” and “creating panic and causing a free fall in the share price”, which effectively reached 43%.
US law firm Proskauer, which filed the lawsuit, believes Gotham and its partners began building a short position in Grifols in the spring of 2023, but in the following months the stock rose more than 60 %, which caused them heavy losses. For this reason, and for fear of a short squeeze that would have ruined the bearish investors, they prepared and published the report, “built on lies”, and communications on social networks, in which they came to assure that the company was “not suitable for investment” and its value was zero.
“Defendants’ very haste to seize ill-gotten gains already shows that Gotham’s report is based on lies,” the suit asserts, and, in fact, “Defendants chose to profit from the fair short position before Grifols made the first public response”, since “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, the shares will rise again”.
One of the key points highlighted in the lawsuit is that Gotham changed its report a day after it sent the stock tumbling and stopped accusing the company of hiding a $95 million loan it had made to Scranton, a investment company linked to the founding family. With this change, the lawsuit states, “the defendants admit that the report they published was false” and the malicious intent is evidenced, because they did not make the correction public. In fact, remembers the demand, the loan is in the accounts sent to the SEC and the CNMV for the last five years.
The lawsuit recalls that Grifols, from 2003 to 2020, was audited by KPMG, also by Grant Thornton since 2017, and the last two years by Deloitte, and that the financial documentation has been reviewed both by the SEC (the regulator of the United States stock market) as by the CNMV, without detecting irregularities.
In addition, he asserts, the group issued bonds in 2017, 2019 and 2021, subscribed by American banks and other countries, which have done their own due diligence on the financial situation of Grifols through other independent auditors to hedge against possible claims from investors who resell the bonds.
In the lawsuit, Grifols does not quantify the amount he claims from the defendants, which in his opinion must include the financial and reputational damage, the profit that the fund has obtained in its operation, the legal costs and a “cost of punishment” on the defendants “in an amount sufficient to prevent further improper conduct”.
To calculate the financial costs, the demand recalls that the stock market capitalization of the group is 3,000 million less than in the days before the publication of the report. The bad reputation, on the other hand, is assessed as “irreparable”, due to the loss of business it has entailed. In his opinion, the reparation should include the additional financial costs that Grifols could incur “if the financial institutions refuse to grant him loans and other lines of credit or only if he agrees to pay higher interest”.
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.
